Notice Board
View All
Thought of the Day :
“ ”
Articles CareerGyaan
Home >> Articles

Articles List

Be the Best and Get the Best
Read more..


                                                         Be the Best and Get the Best

Parenting is one of the toughest jobs on the planet. The diminishing values in the society shout out loud that we need to look within ourselves. The maddening and increasing effects of consumerism, the ill-effects of over exposure to media, the influence of films, and the sudden spurt of over use of technology are also catalyst to the damage already done. “Parenting is one of the most researched areas in the field of social science”, says Stienberg, a distinguished professor of psychology at Temple University in Philadelphia. Times are tough and we indeed need to take steps to avoid further damage or take corrective measures.

Children usually pick up our tendencies. If you have observed keenly if you are parent who speaks softly the general tendency of your child would be to speak softly too. If you, as a couple are cooperative, helpful and supportive of each other, so will be your kids. Children learn more by sheer observation. You might think that when you lie or excuse yourself and avoid talking over the phone nobody would know and are unassuming about your little child who seems not to be listening and at his play but he has surely learnt a lesson  passively. Here the gravity of your problem or the reason behind you avoiding to talk is irrelevant to the child. All the child has learnt is it is okay to be dishonest to save our skin. Children never learn when disciplining is too strict. Some parents feel it is okay to spank kids as consequences.

 Stienberg says “They should never be hit -- not even a slap on a toddler's bottom” and he further adds “If your young child is headed into danger, into traffic, you can grab him and hold him, but you should under no circumstances hit him." Some people behave with or treat their kids as their own parents treated them as kids which shouldn’t be done at all. It would be as incorrect to be too ignorant of what your child does as it would be to hit a child when they do something they were not supposed to do. A balance and thoughtful action should be considered as a consequence when a child misbehaves. A child more often than thought behaves mostly like his own parents as they watch their parents as live examples throughout the day. So if a friend hits your child, if he has seen you hitting someone back in retaliation will tend to follow your footsteps. If you are a calm and a happy soul who never reacts in that manner then there are 100% chances that your child wouldn’t hit back, unless under some other outer influence. Now this is where the role of a parent is important. One has to be very watchful with kids. Not that we spy on them but make efforts to nurture great bond of friendship with them that we hardly have to keep a watch on them. They should feel free to rush to share things with you. One question that most parents fear is “What if we become such good friends that our children stop obeying us. What if they start taking advantage of our friendship and do things we would never approve of?

Now here it is very important to understand that we have to be friends to our kids from day one. We have to take responsibility of every action of our child. We have to learn to teach our kids that our little actions count a lot and create a collective and total effect on the society.

Tips on good parenting:

Good disciplining is not to react by spanking a child; it helps the child learn that every problem can be talked over. You can make some rules to follow but be clear to your children of what you expect them to do. Do not ridicule or taunt them. Discipline them in privacy, when you show respect you get it back in return. Do not ever be harsh or punish your child.

A positive parent raises positive kids. Take pains to focus on your child’s positives rather than the negatives. Praise, a hug or a kiss will make them feel special and they will cherish those feelings forever. People may forget words or actions but they will never forget how you made them feel. Instead of scolding your child for being fidgety if you say “I simply loved it when you were so well behaved on our trip to Disneyland” or “I love it when you help me keep the house clean by not littering” If we as parents take that responsibility to nurture our children into good human beings, than it will not be difficult for us to bring revolutionary changes in our society. So when we are the best we will get nothing but the best. Happy Parenting!

-Purti Shah

Educational Consultant Nagpur
Saturday   27   December , 2014

Reading Is Fun
Read more..

                                       Reading is Fun!

Reading lets you on an exciting adventure .It helps build imagination. Wherever you are, if you have books, you can travel through it, to any age or country. You could talk to any great personalities from history or any cartoon character from a comic. You can feel the excitement from others’ lives and understand what it means to be in their shoes.

When I was young I was an introvert and shy child and stayed indoors most of the times. But I never felt alone or isolated as I had plenty of books to myself. I considered them my friends. I felt a sense of freedom. Every time I picked up a book to read I would be intrigued by how vividly the author described the details of things or places or people that it would be as if meeting them personally. I realized the power of words.

 Words can make you or break you. They can make us laugh or cry. They can heal or wound. While some words kindle hope some can destroy or devastate. They can share secrets, talk about emotions about passions and make the noblest of intentions felt. Words not only affect our emotions and beliefs they are instrumental in getting us to stand up and take actions. Some words from the books of history actually created history; a revolution took place when the words “Give me your blood and I will give you freedom” were uttered by Subhash Chandra Bose to instigate the freedom struggle. Words have the power to move the world. But we all need to polish our vocabulary to make good choice of words. To bring revolutionary changes around us we need to look within ourselves first. Words which are made up of letters have creative powers. Soft words can put a baby to sleep and inflammatory words can ignite violence and hatred. Reading creates an active mental process. Books give lot of clarity on any particular subject. They give you information that is more descriptive and may be pictorial making learning process much easier and faster compared to mere classroom discussion. A dictionary could give us many words but when we read books we learn the application of words. It is the best way to improve one’s language skills as well as imagination.

Book reading as a daily habit helps your brain not just to concentrate but helps you learn and focus on particular things. Reading is to mind what exercise is to body. It expands our horizons, enriches our spirits and exercises our minds.

Well most of you surely must have picked up a book already. Happy Reading!








By Purti Shah

Educational Consultant



Friday   26   December , 2014

Art Of Success
Read more..


Art Of Success


    To become successful in any field in a competitive scenario, two things need to happen. First, one must get a an opportunity to perform. Second, when a chance does come along, one must be able to perform on the given day. 
    While performance on the given day depends on hard skills one has acquired through education and experience and the soft skills one has picked up, getting the opportunity to perform depends largely on creating a great impression by projecting the appropriate image. 
    With increasing competition in every walk of 
life and the resulting preparation, most are aware of the need for hard skills. This they acquire through academic education and technical knowledge. But what many don't spend time on is developing strong interpersonal skills, often referred to as soft skills, and projecting all the inner strengths outside to inspire confidence in an interview or a meeting. 
    But what is not known to career aspirants is known to the corporate world. As companies do away with layers of middle management in these challenging times and senior management trims down, organisa
tions are demanding that people work faster, cheaper and smarter. Corporate cultures have gone from vertical to horizontal, and collaborative partnerships are replacing the old command-and-control managerial hierarchy. 
    In this increasingly team-driven and intimate workplace, leaders and followers interact more closely and deficiencies in personality become clearer. Simply stated, we need strong soft skills just to get along with each other. And when we get along, only then can a company achieve its goals. 
    It's important to understand that, although 
we all carry certain skills, experience and ability, the people we meet usually judge us on the basis of what meets their eyes. Image, that is your appearance, sends messages about you based on which people decide in a few seconds whether to deal with you or not. 
    In the human evolution process, body image develops first and has an effect on self image, self esteem and self confidence making you perform better. At the same time, soft skills increase your competencies and hence, your confidence and self esteem, making it essential for everyone to possess both soft skills and the ability to project a winning image. 
    Soft skills and image management are now getting recognised in India as one of the most relevant and important industries. With even the government deciding to allocate thousands of crores on soft skills development, the industry is growing by leaps and bounds. What is still lacking is the availability of skilled and certified trainers in these areas, as most of the existing trainers are self proclaimed and neither qualified nor certified. 
    India today has already embraced the need for soft skills and image management, and this industry is bound to reward those who make an early entry, either as Soft Skills Trainers, Image Consultants or just ordinary people who wish to apply the knowledge for advancement of their careers or business.

source   Times of India
Wednesday   9   January , 2013

7 types of Tax Deductions for Self-Employed Business Owners
Read more..


What tax deductions can the self-employed take? Here are 7 important types of tax deductions for home businesses and sole proprietors.

It is 2013 and, although we love the idea of a new year with new goals and excitement, the new year brings about something far from new or exciting. For some, it’s downright painful. That something, of course, is taxes! And, as if personal taxes aren’t painful enough, small business taxes can bring on a completely new level of headache, particularly for sole proprietors.


congratulations and second, finding all of the legal deductions you can is essential to lowering your tax bill. Don’t lie - don't even exaggerate. Do make sure that you take advantage of all of the deductions that are available to you. Have you thought of these?

1. Home Office

Most small-business owners have heard of this deduction, but it carries a stigma that is not true. No longer does it significantly up your chances of an audit. That was true 25 years ago when there were far less people working from home but the IRS made changes in the 1990’s that made the deduction more taxpayer friendly.

There are two tests to pass to claim the deduction: First, the space has to be used exclusively as an office. It cannot be a desk in your den or bedroom. It has to be a room 100 percent dedicated to your business. Second, it should be your principal place of business. If you have an office away from your home and you use your home office at night or on weekends, you cannot take the deduction.

It’s best to use tax preparation software or get the advice of a tax professional as this deduction can get complicated, but don’t avoid it for fear of an audit.

2. Your Vehicle

Again, you may know that a business vehicle is deductible, but if you think that you can only deduct expenses from a vehicle that is used 100 percent for business purposes, think again. This is not your home office. Vehicles are different. There are two methods to deduct vehicle expenses: the standard mileage rate or your actual expenses. Think of it like itemizing or taking the standard deduction on your personal taxes


The standard mileage rate, which is 55.5 cents in 2012, is the easiest way. Add up the miles you drove for business and multiply by the rate. To use your actual expenses instead of the standard mileage rate, you can add up all of your expenses including gas, repairs and maintenance, insurance, registration, and anything else and subtract from the total the percentage you used your vehicle for personal use.

You will need documentation either way, but if your record keeping skills could use a little improvement, you should probably stay with the standard mileage rate.

Tip: Don't forget to save receipts from toll booths and parking lots. No matter which method you use, you can deduct tolls and parking fees you incur during business travel as a separate item from car expenses.

3. Your Necessary Business Expenses.

The IRS refers to these as "ordinary and necessary" expenses. Besides the mundane supplies like staples and paper that you use every day, depending on the nature of your business, your necessary business expenses might include skis, a toolbox, kitty litter or an Internet marketing conference in Las Vegas, NV.  The two keys to making unusual business deductions stick:

  • Keep receipts
  • Keep good records showing the reason for the expense and how it was used in or helped your business.

4. Bad Debt

Do you have customers on your books that have not paid? Providing you included the revenue in your gross receipts, you can deduct the bad debt. If you use the accrual method for your accounting, you are claiming the income as you bill it so you could take a bad debt deduction.

If you use the cash method, you are not claiming the income until you have the money in hand. In that case, you cannot deduct bad debt since it is not on your books as income.

5. Work Opportunity Tax Credits

If you hired an employee in a certain target group as defined by the Department of Labor, you can receive a tax credit of up to $9,600 depending on the type of employee hired. Eligible employees include some veterans, people receiving food stamps, and some ex-offenders among others. Go to the Department of Labor’s website to learn more.

6. Insurance and Retirement

If you are paying for health insurance premiums and you are not eligible under a spouse’s plan, those costs are 100 percent deductible. If your spouse is working for you and you offer the same benefits to other employees, you can deduct his or her costs as well. You can’t deduct more than the net income of your business.

You can also deduct the amount you contributed to a qualified retirement plan. Do this on your personal taxes since it affects you, the individual.

7. Social Security

This is one of the downsides of being a small-business owner. Not only do you have to pay your own Social Security premium, businesses are required to pay half of your premium on your behalf. As a result, you have to pay both halves.

You can deduct, however, half of what you paid on your 1040 return.


As your business grows, you’ll find a level of complexity to tax law that you did not think possible. At some point, it will be best to hire a tax professional to help. It might not be this year, but if you do your own taxes, you may be leaving deductions unclaimed. If so, a tax professional may be money well spent. (And the money you pay that person is deductible too.)



Tuesday   8   January , 2013

Practical ways to protect your online privacy
Read more..


Your personal information is under a nearly constant assault from hackers and criminals, and you can no longer trust in luck and safety in numbers for protection. Just a few days ago, I told you about how criminals can use social engineering to completely circumvent the need to have your password, for example. So is all hope lost?


Nope -- if you're careful and follow some simple rules for protecting your privacy, you can still win the war against cybercrime. Here are some things you absolutely should already be doing -- or, failing that, start doing -- today:

Never reply to emails with personal information. I'll start with a gimmie. Everyone know this already, right? It's easy to send an email that looks like it came from your bank. But financial institutions will never ask you to reply to an email with your Social Security number, password or any other personal info. If an email asks for information like that, just delete it -- it's a phishing expedition.



Never click a link in an email to go to your banking web site. Even people who would never think to reply to an email with their account number and password might still click a link in a message to "conveniently" go to their account login page. But this might still be a phishing trip, and you could be clicking to a site that's about to capture your login information. Always navigate to a web page yourself via your browser.

Use a unique password on every site. Don't use the same password on Facebook and your bank -- if Facebook is ever compromised, you've just given away the keys to your finances. Use a password keeper like Roboform or Lastpassso you don't need to remember 500 passwords.

Use 2-factor authentication whenever possible. If your email service and financial institutions offer it, enable 2-factor authentication. This is a security process that requires you to enter a new, unique passcode every time you try to log into the site -- and that code comes from your phone. So unless a cybercriminal has access to your phone, they can't log in, even with your ordinary password.

Be careful what you say online. Social engineering scams often work because cybercriminals know enough about you to bluff their way through a call with customer service. Don't share details about recent Amazon purchases, for example, to cut off one vector that scammers can use against you. 

Password protect your devices. It's a pain, but you should lock your phone, tablet and laptop with passwords or PINs. Don't use the same PIN for every device, and don't use an easy-to-guess PIN like 0000 or 1234.
Friday   4   January , 2013

Preamble of India

5 Best Portable External Hard Drives
Read more..


Today portable hard drives pack greater capacities into small devices. This unsung hero of the gadget world can be found on almost any geek’s desk, usually tucked away behind a monitor or stuffed in a drawer.  These are light and powered by the data transfer bus, so no additional power supply is needed. They are the ideal solution for carrying around large amounts of data.



But it's not all about small form factor. Yet it is of great importance, as it is often used to back up critical data or store a library of music, videos and photos. There are plenty of drives available out in the market here are the best 5 portable external hard drives.



1. Western Digital Elements Desktop



Western Digital Elements external hard drive is an easy-to-use, reliable way to add more storage to your PC or Mac. Simply plug it in to a USB port and start saving or backing up your photos, music, video, and files. It is preformatted for immediate use so there is no software or CD to load.  It is designed for use with Windows-based computers and it can be easily reformatted for use with Macs. The compact, durable metal case provides extra data protection helping keep data safe from loss.



This external hard drive is equipped with a high performance with the transfer speed from 28MB per second to 38MB per second. This is because it operates at 7200RPM, so it is pretty fast. It is designed with the same commitment to quality that made WD external drives the number one selling drives in the world. It has a price of 4,627 for 2 TB.



2. Iomega Prestige



The Iomega Prestige portable hard drive provides a simple and affordable solution for all your storage needs and an ideal for adding capacity to your system. This stylish drive offers a strong aluminum construction and included stand which will resist good shots without damage and also can be used both horizontally and vertically as the user likes.



It has a very beautiful finishes making it ideal to be on your desktop but is a little slower than some of its competitors. It connects via USB 2.0 port, FireWire, or eSATA and does not come with any software. Within the range of Prestige it runs at 7200rpm, has an 8MB cache and data transfer speed is 25 MB to 20 MB of reading and for writing. It is priced at 5,913 for 1.5 TB.



3. LaCie Design by Neil Poulton



The LaCie hard disk, design by Neil Poulton adds a sleek, sophisticated style to your desktop to delivering high-speed performance as a hard drive. Neil Poultion is a Scottish designer worked for many technology companies to design to order any of their products.



The design is simple in fact it is rectangular and looks like a brick. It is made of glossy black plastic for a visual impact, but it’s a bit sensitive to fingerprints. It works via USB 2.0 ports, FireWire and eSATA and has 1TB of storage capacityThis device is certainly one of the best there is around in the market for its beautiful design. The transfer speed is not the best but without doubt it is something we can ignore considering its beauty.



With Hi-Speed USB 2.0, this efficient hard drive makes a great companion to your PC or Mac. The setup is nearly effortless it is plug & play and offers customizable formatting. This beautiful hard drive has a price of 3,856 for 1 TB.

4. Western Digital My Book 3.0



The Western Digital My Book series is one of the longest running product brand names in the storage market. The My Book 3.0 has the same glossy black book like covering as Western Digital's other external hard drives. The main draw of the My Book 3.0 is its super speed USB 3.0 interface, which manages to break it free from the speed bottlenecks faced by current USB 2.0 external hard drives.



It is a sleek enclosure around two inches wide and seven inches tall. The top, bottom and back are vented to allow air to flow over the internal drive, but the front and sides have a matte black finish. With super speeds it feel entirely like you are using an internal hard disk and not the external drive, it is pretty fast that you can use for both storage and for daily purposes. It has a pretty high price for the super speed USB 3.0, it is available at the price of 9,015 for 3 TB.



5. Seagate FreeAgent GoFlex



Seagate has a huge market in India. It is designed almost identical to previous versions and it allows connections through both USB 2.0 and 3.0, FireWire 800 and eSATA. The device weighs only 148 grams, with 1TB makes it an attractive option for transport.



It comes pre-loaded with an installer that includes several Seagate and Memeo utilities. It can be used with windows PC or Mac with a simple reformatting. The installer can also set the FreeAgent GoFlex up with sync software, file encryption, and a more feature-rich Memeo Premium backup utility.



The device also comes with a dock that will unplug and carry a very simple and leave the dock all the time on your computer through the USB port. It is available for the price of 4,118 for 1TB.

















Saturday   22   December , 2012

The Four Types of Digital Marketer
Read more..


If you are the chief marketing officer (CMO) of a consumer-oriented business — for example, a food manufacturer or a retail bank with a credit card offering — your long-established efforts to reach customers may have come into question over the past few years. Digital media have changed the advertising and marketing ecosystem; social networks, broadband infrastructure, and new forms of online and offline data collection have transformed the relationships among companies and their customers. But only a few CMOs have fully caught up with these trends. Most companies do not yet have the kinds of capabilities in digital marketing that they need in order to fully engage with customers today.

The term customer centricity is coming into broad use as a way to describe the new marketing orientation made possible by digital media (including, but not limited to, social networks). Under this new orientation, the primary unit of market engagement is no longer the product, the launch, the trade promotion, or the advertising campaign, but the end-to-end consumer experience. Consumers are engaged with the company and each other before, during, and after their purchase.

This requires a high level of integration, the ability to bring together multiple sources of content, data sources, capabilities, and product lines, and to continually refine segmentation approaches, platforms, and online content. This integration needs to cut across the consumer experience, creating a seamless digital marketing link between sales in physical stores and sales through e-commerce.

Nike Inc., for example, has invested heavily in both the media it creates and the media it shares with its consumers. On, consumers can find a continually evolving set of software and services generated by the apparel and footwear manufacturer (including training programs for use with interactive game machines such as Microsoft’s Kinect), as well as the new “FuelBand,” worn on the wrist to track and analyze daily movements. Consumers can also access a growing body of links to Facebook pages and Instagram pictures put up by others in the Nike community. Everything on the website is designed in harmony, so that the brand reinforces the idea that the company has the back of the amateur athletes who make up its core audience, and they in turn are regularly drawn back to the experience of not just wearing the products, but using them together. In the process of developing its digital media strategy, Nike has dramatically lowered its spend on paid media. And by focusing its spending on its own media and socially shared media, the company has broadened and deepened the impact of its brand.

How far along this road is your company — and what capabilities does it need to compete successfully? Answering that question is the purpose of a self-guided, Web-based survey called the Digital Customer Centricity Profiler, recently launched by Booz & Company. The profiler focuses on relationships with consumers and potential consumers, and on companies’ facility (or lack of facility) in engaging them online along their full path to purchase. The profiler takes only about 10 to 15 minutes to complete. It asks about your company’s current practices in social media, data analytics, and e-commerce, and helps you gauge the potential of other practices, of which you may not have been aware. Then, on the basis of your answers and those of your peers (the answers themselves remain private), it classifies your company into one of four categories:

During its first month online, the profiler results have affirmed our preliminary view that although there is no single path to leadership, those that are digital leaders are investing in similar capabilities. They are focused on building stronger direct-to-consumer relationships, developing content solutions to better engage consumers in their categories, leveraging social media as a valuable platform for insights, and building out a stronger multichannel experience. Depending on your company’s situation, your own digital marketing capabilities might include a distinctive way of changing your portfolio of products to address social media responses; a highly effective form of segmentation based on the way consumers behave in the real world (for example, tracking how much time elapses between visits to your retail store); or an ability to create a compelling e-commerce platform that draws people to your products.

A digital marketing plan aligned with your company’s strategy can be a game changer for your business. It can allow you to build stronger relationships with consumers that are based on offering them better value in real time: more appropriate deals, more authentic offers, and more simplicity and clarity. But not on its own. You will need the right capabilities and the appropriate investment of time and attention. Through experience, and through the kind of self-assessment that the profiler brings forward, your company can gain a better understanding of where you are now — and how to move forward.




  • Leaders are a small but growing group of companies, including Nike, Burberry, 3M, Apple, L.L. Bean, and Coca-Cola, that have mastered the two main capabilities involved in maintaining an online presence: insights and analysis on the one hand, and platforms and activation on the other.
  • Scholars are skilled at consumer insights and analytics; some of them, for example, have developed sophisticated forms of market segmentation based on deep insights about the way people make purchases. But they have not yet converted these insights and analyses into profitable action.
    • Pioneers have established a robust presence in digital media, with viable forms of electronic commerce, their own media platforms, or other kinds of Web-, mobile-phone, or app-based services. But these activation platforms are not sufficiently customer centric; they are not grounded in insights about their customer base, and therefore they do not engage consumers as well as they might.
    • Novices are still coming up to speed in the practices of digital marketing, and (in many cases) discovering which facets benefit them and which may not.
Wednesday   12   December , 2012

Unemployment: The Curse of Joblessness
Read more..


The number of people at work is generally closely related to whether an economy is growing at a reasonable rate

Unemployment: The Curse of Joblessness

There must be an app for this (photo: Susana Vera/Reuters/Corbis)

At the peak of the worldwide recessionthat began in 2008, the International Labor Office announced that global unemployment reached the highest level on record. More than 200 million people, 7 percent of the global workforce, were looking for jobs in 2009.

It is not a coincidence that the global economy experienced the most severe case of unemployment during the worst economic crisis since the Great Depression. Unemployment is highly dependent on economic activity; in fact, growth and unemployment can be thought of as two sides of the same coin: when economic activity is high, more production happens overall, and more people are needed to produce the higher amount of goods and services. And when economic activity is low, firms reduce their workforce and unemployment rises. In that sense, unemployment is countercyclical, meaning it rises when economic growth is low and vice versa.

But unemployment does not fall in lockstep with an increase in growth. It is more common for businesses to first try to recover from a downturn by having the same number of employees do more work or turn out more products—that is, to increase their productivity. Only as the recovery takes hold are businesses likely to add workers. As a consequence, unemployment may start to come down only well after an economic recovery begins. The phenomenon works in reverse at the start of a downturn, when firms would rather reduce work hours, or impose some pay cuts before they let workers go. Unemployment starts rising only when the downturn is prolonged. Because unemployment follows growth with a delay, it is considered a lagging indicatorof economic activity.

How sensitive is the unemployment rate to economic growth? That depends on several factors, most notably on labor market conditions and regulations. One estimate of the strength of this relationship for the U.S. economy comes fromOkun’s Law (named after the late U.S. economist Arthur Okun), which postulates that a decline in unemployment by 1 percentage point corresponds to a 3 percent rise in output. More recent estimates find that the consequent rise in output may be lower, possibly between 2 and 3 percent.

Jobs and growth


How far does this inverse relationship between growth and unemployment go? If economies kept expanding, would one expect to see unemployment disappear altogether? Actually this is not the case (see chart); even in the 2000s, when the global economy was prospering (at least until the crisis), global unemployment declined but never reached zero. This observation raises the question, why can unemployment never fall to zero?

Clearing the market

According to classical economic theory, every market, including the labor market, should have a point at which it clears—where supply and demand are equal. Yet the very existence of unemployment seems to imply that in labor markets around the world, the demand for and supply of labor fail to reach an equilibrium. Do labor markets continually fail?

Sometimes it is a matter of wages, or the unit price of labor, not adjusting to clear the market. Some workers, particularly skilled ones, may havereservation wages below which they are not willing to work, but which are higher than what employers are willing to pay. Alternatively, the wage an employer is willing to pay may be lower than the legal minimum wage set by governments to try to ensure that wages can sustain a living. When such rigidities in the labor market lead to a shortage of jobs, it creates structural unemployment, and those who are structurally unemployed tend to have longer spells of joblessness, on average.

But the inflexibility of wages does not fully explain the perennial nature of unemployment. Some level of unemployment will always exist for no other reason than that there always will be some people who are between jobs or just starting out their careers. These people are unemployed not because there is a shortage of jobs in the market, but because finding a job takes time. Such temporary spells of unemployment are referred to as frictional unemployment.

The combination of these factors brings about a long-term average around which the unemployment rate tends to fluctuate, called the natural rate of unemployment (NRU). The term “natural” does not mean it is a given that cannot be changed; to the contrary, it implies that labor market characteristics, which are mostly driven by policies, determine it. For example, the relatively high rate of unemployment in Europe compared with the United States is in part attributed to Europe’s stronger unions and stricter labor regulations. These labor market institutions may give European workers a better bargaining position, but they can also render workers too expensive for employers. In the United States, unionization is lower and labor markets are more flexible, but workers have traditionally enjoyed higher employment rates than their European counterparts.

The natural rate of unemployment is sometimes called the nonaccelerating inflation rate of unemployment (NAIRU), because it is consistent with an economy that is growing at its long-term potential, so there is no upward or downward pressure on inflation. The flip side of this argument suggests that whenever unemployment temporarily deviates from the NAIRU, inflation is affected. Consider a recession, a period of low economic activity. With lower demand for goods and services, firms start laying off workers and at the same time refrain from raising prices. So unemployment rises and inflation falls during recessions. This trade-off between unemployment and inflation—described by the Phillips curve (named after the late New Zealand economist William Phillips)—is only temporary, though; once prices adjust to a new equilibrium that clears the goods and services market, firms go back to producing at full capacity and unemployment once again falls—to the NAIRU.

Understanding what is behind the long-term equilibrium rate of unemployment helps policymakers understand how they can, and cannot, change it. For example, policies that try to lower unemployment by boosting consumer demand (thereby raising production) can do so only temporarily, and at the cost of higher inflation later. However, policies that are geared toward easing frictional or structural unemployment can boost employment without necessarily affecting inflation.

But the NAIRU can also change over time without any explicit policy action: structural changes such as technological advances and demographic shifts can have long-lasting effects on unemployment trends. For example, many economists agree that the technology boom of the 1990s increased labor productivity, making each worker more “desirable” to employers, and has therefore reduced the NAIRU—although there was an initial blip of unemployment as workers untrained in the technologies were displaced. A rapidly aging population—as is occurring in many advanced economies today—also countributes to fewer people in the job market and lower unemployment.

Measuring unemployment

Not all people who don’t work are unemployed. To be considered unemployed for government statistics, a person must not only be out of work, but also be actively looking for a job—for example, by sending out resumes. In the United States unemployment is measured by a monthly survey of households conducted for the Bureau of Labor Statistics and covers a representative sample of more than 100,000 individuals. The labor force includes both those with jobs and those looking for them. The unemployment rate is the percentage of the labor force that is looking for a job. The labor force is only a portion of the total population. The ratio of the labor force to the working-age population is called the labor force participation rate.

The labor force excludes people who are of working age but are neither employed nor looking for a job—such as students and homemakers. But the labor force also leaves out jobless people who were in the job market unsuccessfully for so long that they stopped looking for a job. Suchdiscouraged workers are one reason why unemployment statistics can underestimate the true demand for jobs in an economy. Another form of hidden unemployment in statistics comes from counting as employed anyone who didany work for pay (or profit, if self-employed) in the week before the government survey. This hides the demand for work by people who would prefer full-time employment but cannot find it.


Wednesday   12   December , 2012

Gross Domestic Product: An Economy’s All
Read more..


When it is growing, especially if inflation is not a problem, workers and businesses are generally better off than when it is not

Gross Domestic Product: An Economy’s Total Output

Stack them up (photo: Monty Rakusen/Corbis)

Many professions commonly use abbreviations. To doctors, accountants, and baseball players, the letters MRI (magnetic resonance imaging), GAAP (generally accepted accounting principles), and ERA (earned run average), respectively, need no explanation. To someone unfamiliar with these fields, however, without an explanation these initialisms are a stumbling block to a better understanding of the subject at hand.

Economics is no different. Economists use many abbreviations. One of the most common is GDP, which stands for gross domestic product. It is often cited in newspapers, on the television news, and in reports by governments, central banks, and the business community. It has become widely used as a reference point for the health of national and global economies. When GDP is growing, especially if inflation is not a problem, workers and businesses are generally better off than when it is not.

Measuring GDP

GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. An alternative concept, gross national product, or GNP, counts all the output of the residents of a country. So if a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP.

Not all productive activity is included in GDP. For example, unpaid work (such as that performed in the home or by volunteers) and black-market activities are not included because they are difficult to measure and value accurately. That means, for example, that a baker who produces a loaf of bread for a customer would contribute to GDP, but would not contribute to GDP if he baked the same loaf for his family (although the ingredients he purchased would be counted).

Moreover, “gross” domestic product takes no account of the “wear and tear” on the machinery, buildings, and so on (the so-called capital stock) that are used in producing the output. If this depletion of the capital stock, called depreciation, is subtracted from GDP we get net domestic product.

Theoretically, GDP can be viewed in three different ways:

● The production approach sums the “value-added” at each stage of production, where value-added is defined as total sales less the value of intermediate inputs into the production process. For example, flour would be an intermediate input and bread the final product; or an architect’s services would be an intermediate input and the building the final product.

● The expenditure approach adds up the value of purchases made by final users—for example, the consumption of food, televisions, and medical services by households; the investments in machinery by companies; and the purchases of goods and services by the government and foreigners.

● The income approach sums the incomes generated by production—for example, the compensation employees receive and the operating surplus of companies (roughly sales less costs).

GDP in a country is usually calculated by the national statistical agency, which compiles the information from a large number of sources. In making the calculations, however, most countries follow established international standards. The international standard for measuring GDP is contained in theSystem of National Accounts, 1993, compiled by the International Monetary Fund, the European Commission, the Organization for Economic Cooperation and Development, the United Nations, and the World Bank.

Real GDP

One thing people want to know about an economy is whether its total output of goods and services is growing or shrinking. But because GDP is collected at current, or nominal, prices, one cannot compare two periods without making adjustments for inflation. To determine “real” GDP, its nominal value must be adjusted to take into account price changes to allow us to see whether the value of output has gone up because more is being produced or simply because prices have increased. A statistical tool called the price deflator is used to adjust GDP from nominal to constant prices.

GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets. When GDP is shrinking, as it did in many countries during the recent global economic crisis, employment often declines. In some cases, GDP may be growing, but not fast enough to create a sufficient number of jobs for those seeking them. But real GDP growth does move in cycles over time. Economies are sometimes in periods of boom, and sometimes in periods of slow growth or even recession (with the latter often defined as two consecutive quarters during which output declines). In the United States, for example, there were six recessions of varying length and severity between 1950 and 2011. The National Bureau of Economic Research makes the call on the dates of U.S. business cycles.

Comparing GDPs of two countries

GDP is measured in the currency of the country in question. That requires adjustment when trying to compare the value of output in two countries using different currencies. The usual method is to convert the value of GDP of each country into U.S. dollars and then compare them. Conversion to dollars can be done either using market exchange rates—those that prevail in the foreign exchange market—or purchasing power parity (PPP) exchange rates. The PPP exchange rate is the rate at which the currency of one country would have to be converted into that of another to purchase the same amount of goods and services in each country. There is a large gap between market and PPP-based exchange rates in emerging market and developing countries. For most emerging market and developing countries, the ratio of the market and PPP U.S. dollar exchange rates is between 2 and 4. This is because nontraded goods and services tend to be cheaper in low-income than in high-income countries—for example, a haircut in New York is more expensive than in Bishkek—even when the cost of making tradable goods, such as machinery, across two countries is the same. For advanced economies, market and PPP exchange rates tend to be much closer. These differences mean that emerging market and developing countries have a higher estimated dollar GDP when the PPP exchange rate is used.

The IMF publishes an array of GDP data on its website ( International institutions such as the IMF also calculate global and regional real GDP growth. These give an idea of how quickly or slowly the world economy or the economies in a particular region of the world are growing. The aggregates are constructed as weighted averages of the GDP in individual countries, with weights reflecting each country’s share of GDP in the group (with PPP exchange rates used to determine the appropriate weights).

What GDP does not reveal

It is also important to understand what GDP cannot tell us. GDP is not a measure of the overall standard of living or well-being of a country. Although changes in the output of goods and services per person (GDP per capita) are often used as a measure of whether the average citizen in a country is better or worse off, it does not capture things that may be deemed important to general well-being. So, for example, increased output may come at the cost of environmental damage or other external costs such as noise. Or it might involve the reduction of leisure time or the depletion of nonrenewable natural resources. The quality of life may also depend on the distribution of GDP among the residents of a country, not just the overall level. To try to account for such factors, the United Nations computes a Human Development Index, which ranks countries not only based on GDP per capita, but on other factors, such as life expectancy, literacy, and school enrollment. Other attempts have been made to account for some of the shortcomings of GDP, such as the Genuine Progress Indicator and the Gross National Happiness Index, but these too have their critics.


Friday   7   December , 2012