Economics: HDI, Unemployment, and Globalization

This document discusses the Human Development Index (HDI) as a measure of well-being, the impact of unemployment on the economy, and the relationship between globalization and poverty reduction in developing countries.

ECONOMICS
Economics
Name of the Student
Name of the University
Student ID

1
ECONOMICS
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................4
References........................................................................................................................................6

2
ECONOMICS
Answer 1
Thesis statement: Human Development Index (HDI) produces a good index for tracking well-
being of the economy and the society as a whole.
Critical analysis
HDI is a combined measure of well-include state of education, health and per capita
income. There is separate index for each of these indices and HDI is the weighted average of
these three indices with each having an equal weight. Life expectancy at birth represents state
health. Gross enroll ratio and adult literacy are representative measure of education. For per
capita income gross national income is taken into consideration. The index ranged between 0 and
1. Values closer to 1 represent higher human development while value closer to 0 represent low
levels of human development.
How good is HDI is measuring overall well-being is a matter of debate. There are some
instances where HDI constitutes a good measure of well-being while in others HDI suffers from
significant shortcomings. Health and education are among the basic necessities of life. People in
their lifetime always want to acquire more education and live a long and healthy life. In order to
satisfy these basic necessities people, need a higher average income. Therefore, situations where
human development is measured in terms of achieving success to basic necessities HDI is a good
measure. Most of developed countries despite having far higher average income ranked lower in
in the HDI list. Norway though is far behind than US in terms of aggregate income, the nation
still enjoys a better quality of life in terms of ensuring longer life for its people. Here, HDI ca be
regarded as good indicator as it indicates true picture of development.

3
ECONOMICS
HDI excludes the value of social, political and economic freedom which are also
important aspect of Human development. Poverty and unemployment are excluded in the
computation of HDI. The aspects of spirituality and human morality do not come under HDI
calculation for example, country with higher suicidal rate may have higher HDI rank and hence,
constitutes a higher development. There is no measure in HDI that can penalize nations for
having lower morality or spirituality.
Answer 2
Thesis statement: Unemployment possesses serious threat to the economy
Critical analysis
A direct measure representing state of labor market in the economy. Unemployed persons
represent that group in the labor market who despite actively looking for jobs cannot manage to
find appropriate jobs in the economy. Most economist are in favor of the fact that some
unemployment is good for the economy. This is as long as unemployment rate remains within
the limit. Non-accelerated inflation rate of unemployment or NAIRU defines the unemployment
limit. This amount of unemployment is required maintain stability in the existing level of wage
and inflation at a given time. This type of unemployment is associated with stability in the labor
market. The Australian Bureau of Labor Statistics computes the current NAIRU rate as 5
percent. That is every 1 in 20 working age people found to be unemployed in the economy.
NAIRU however is not fixed in an economy. Different factor might influence the rate.
For example, NAIRU may be reduced following an increase in underemployment defined in
terms of informal or casual employment or different part time workers as is frequent in Australia.
This does not indicate any improvement in the condition of labor market. NAIRU may also be

4
ECONOMICS
reduced due to active policy intervention in the form of subsidies for improving education and
health condition. Besides this, unemployment has other negative consequences in the economy.
Author of the attached article “Unemployment is a necessary evil” thus does not support the
claim of unemployment being a good thing. There arises a feeling of low self-esteem if people
remain unemployed for a considerable long-period. The situation of joblessness raises poverty by
preventing unemployed person to support their basic necessities. Persistent unemployment
encourages people to involve in crime and other negative activities. Not only the current
generation, the future generations are also vulnerable to likely consequences of unemployment as
the effect trickles down to future generation as well. Therefore, economy requiring a
considerable large number of people to be unemployed cannot be treated as an efficient
functioning economy. Thus, the need for measures alternate to NAIRU.
Answer 3
Thesis Statement: The spread of development lowers poverty in developing world
Critical analysis
Globalization is a process of growing integration among various nations in terms of
aspects like technology, politics and economic factors. Different countries across the globe
widely adapted the process since the latter half of 1980. Globalization has affected different
economic indicator like economic growth, trade, investment and the like. The impact of
globalization on poverty reduction however is a highly debated aspects. There are both
supporters and opponents of the claim that poverty significantly reduces poverty in the
developing world. Globalization can reduce poverty through two main channels – enhancing
economic growth and promoting integration with the global world. The argument that increased

5
ECONOMICS
economic growth reduces poverty is based on the assumption that fruits of economic growth are
evenly distributed. Evidences show that globalization has allowed developing countries to
account a per capita GDP growth of above 5 percent. As globalization promotes economic
integration across nations, developing countries now have become more open than they
previously were. Trade further fuels economic growth and reduces poverty. Example of
developing countries experiencing a considerable decline in poverty are China, South, East and
South East Asian nations, Indonesia and India. More than 50 percent population of developing
countries live in the above mentioned countries. The highest growth rate has been accounted by
China. Between 1981 and 2001, poverty in rural China declined from 79 percent to 27 percent.
For India and Indonesia, the respective rate of rural poverty are 42 percent and 11 percent from
earlier 63 percent and 55 percent.
The assumption that fruits of economic growth are distributed neutrally is flawed.
Globalization actually aggravates global inequality by giving more power to the hands of
developed nations. The opponents actually claim that globalization has mostly benefitted the rich
countries. Contribution of developing countries in the globalization process is merely the
suppliers of low cost labor and raw materials. An example of countries suffering from increased
global power of developed countries are Sub Saharan African countries. Therefore, to distribute
the gain of globalization evenly developing countries certain structural measures.

6
ECONOMICS
References
Gough, I., 2017. Globalization and national welfare regimes: The East Asian case. In Social
Security in the Global Village(pp. 63-82). Routledge.
Herrero, C., Martínez, R. and Villar, A., 2017. Population Structure and the Human
Development Index. Social Indicators Research, pp.1-33.
Hou, J., Walsh, P.P. and Zhang, J., 2015. The dynamics of human development index. The
Social Science Journal, 52(3), pp.331-347.
Kail, R.V. and Cavanaugh, J.C., 2018. Human development: A life-span view. Cengage Learning.
Kratou, H. and Goaied, M., 2016. How can globalization affect income distribution? Evidence
from developing countries. The International Trade Journal, 30(2), pp.132-158.
Ravallion, M., 2018. Inequality and globalization: A review essay. Journal of Economic
Literature, 56(2), pp.620-42.