ARG-147

The following appeared as part of an article in a Dillton newspaper.

"In an effort to bring new jobs to Dillton and stimulate the city's flagging economy, Dillton's city council voted last year to lower the city's corporate tax rate by 15 percent; at the same time, the city began offering generous relocation grants to any company that would move to Dillton. Since these changes went into effect, two new factories have opened in Dillton. Although the two factories employ more than 1,000 people, the unemployment rate in Dillton remains unchanged. The only clear explanation for this is that the new factories are staffed with out-of-town workers rather than Dillton residents."


Write a response in which you discuss one or more alternative explanations that could rival the proposed explanation and explain how your explanation(s) can plausibly account for the facts presented in the argument.


In this article in a Dillton newspaper, the author concludes that the two new factories, which recently moved to Dillton where the city began offering generous relocation grants, must be staffed with out-of-town workers instead of Dillton residents. He/She arrives at his conclusion from Dillton’s unchanged unemployment rate despite the fact that the factories employ more than 1,000 people. While the author’s explanation could be the reason for this, there are at least two alternative explanations that could rival the one endorsed by the author. Unfortunately, due to very limited amount of information, it is too early to state with certainty which is the most likely explanation.

To begin with, the proposed explanation is related to the actual number of the unemployed. Although the two factories hire more than 1,000 employees, these newly employed may actually be Dillton residents who already have a job in Dillton. That is to say, the total number of employed and unemployed people in Dillton remains the same. The reason for this migration within the labor force could be that those positions require highly skilled workers, while those who are currently unemployed in Dillton are not qualified. In this scenario, the unemployment rate would not be affected because the addition of more than 1,000 positions are accompanied by the exact same number of job vacancies elsewhere that cannot be fulfilled by the existing labor force.

If we divide the labor force into the employed and unemployed population, the abovementioned scenario indicates internal turnover within the employed population without any impact on either the number of the unemployed or the total work force. With this definition at hand, a second possibility emerges: the 1,000 new jobs were accompanied by a reduction of 1,000 jobs elsewhere, possibly due to fierce market competition brought by the advent of the new factories. Hence there is an exchange between the employed pool and the unemployed population, but the net effect on employment rate is nil.

Finally, another possible explanation originates from the fluctuation of total population, and specifically speaking, the total size of the work force. While in pure theory the new factories could incorporate more than 1,000 new employees from the unemployed population, the change in the total size of work force is capable of offsetting this increase. For argument’s sake, let’s suppose that the city’s unemployment rate is 50% and the total work force increased by more than 2,000, exactly twice as many as newly hired employees in the aforementioned two factories. In this case, the employment rate and thus the unemployment rate, remains unchanged. Multiple reasons for the increase in the size of the work force can be put forward, one of these being immigration from other areas in hopes of seeking better jobs. Another reason could be a large number of people in Dilton turning 20 and being considered as the member in labor force. Regardless of the specific reasons, we can achieve a steady unemployment rate by adjusting both the number of employee and the size of the labor force.

To summarize, the three possibilities discussed above are alternative explanations that can challenge the one proposed by the author. However, due to a lack of critical evidence, we cannot determine which one is best until a more thorough investigation of Dillton’s job market is presented.



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