Unemployment from macro-economic policy analysts. Additionally, it
Unemployment is a macro-economic situation whereby people are ready to work at the current wage rate but because of the prevailing factors of production are not in a position to get placement.
International Labour Organization defines unemployed people as those who are aged over 16 years and are willing to work and have actively sought employment during the previous four weeks and do not have any paid job. There are various types of unemployment namely: Cyclical unemployment, Frictional unemployment, Structural unemployment, Seasonal unemployment, Voluntary unemployment and under employment (Seymour 2005).
Cyclical Unemployment is a type of unemployment, which occurs because of decline in Gross Domestic Product (GDP) especially during periods of contraction/recession or any period when the economy fails to operate at its potential. It is controllable thus receives a lot of attention from macro-economic policy analysts. Additionally, it is characterised by temporary suspension without pay due to reduced demand of goods or services they produce and has to last for a period of seven consecutive days (Seymour 2005).
Frictional Unemployment is unemployment resulting from people leaving jobs that they do not like and are searching for new employment or people whom either entering or re-entering the labour force to search for a job. Time lapses between separation and discovery of new job.
Structural Unemployment represents unemployment caused by permanent shifts in the pattern of demand for goods or services or changes in technology. This requires the employees to undergo training or move to other locations to find new jobs (Seymour 2005).
Seasonal Unemployment is a type of unemployment, which is caused by seasonal conditions affecting specific factors. For example, the agricultural sector is dependent on rainwater. Hence, during periods of good rains there will be high economic activities creating jobs while during periods of dry season there will massive unemployment due to less economic activities.
Voluntary Unemployment is unemployment by choice experienced in most of the developed countries. This happens because of the unemployment benefits given by the UK government thus encouraging most youths to look for highly paying jobs. Therefore, in the short-run most of them remain unemployed. Such decisions by most youth have led to increased level of youth unemployment in UK (UK National Statistics 2012).
Underemployment; under normal circumstances people are supposed to work for 6-8 hours a day. Therefore, if an individual works for less than six hours then they are underemployed. This is because the talent or effort is not fully utilized. It can also occur when an individual is working in a sector where their skills are underutilized (Seymour 2005). Most of the youth in UK are either working fewer hours such as part time while others work in sectors where their skills are underutilized (BBC News 2012).
Unemployment rate measures the unemployment level. It is the proportion of economically energetic people who do not have jobs (i.e. number of people who are unemployed divided by number of those who are in paid jobs or employed, excluding those who are economically inactive from both numerator and denominators) (UK National Statistics 2012).
Statistics of Youth Unemployment in UK
Economists and the government have carried out several researches over the years about the youth unemployment rate in the UK. According to Labour Force Survey (LFS), youth unemployment rate in the year 2004 rose from 12% to 15% in the year 2008 (BBC News 2012).
The number of unemployed youth between the age of sixteen and twenty five years has risen in the current recession by over 4% since 2008 and then by over 5% in the year 2010. This means that the unemployment rate for people aged 16-24 years is now triple the rate for older people. The rate of unemployment for individuals over 25 years have also followed similar trajectory since 2004. Therefore, the unemployment rate for people over 25 years in 2010 was still lower than that in the early 1990 (BBC News 2012).
The Office for National Statistics (ONS) says that the unemployed youth aged 16-24 has risen more than one million, which is the highest for 15 years. The total number of people unemployed is 2.62 million, which is the highest since 1994 according to ONS. The youth have borne the effect of economic slowdown.
Thus, out of the 2.62 million, 1.02 million are youth aged between 16 and 24 according to survey carried between July and September last year (HRM Guide 2012). This has led to people claiming job seekers allowance to rise by 5300 to 1.6 million last month according to ONS. The ONS says that this is the highest rate since they adopted the comparable method in 1992 despite the slight change in basis of calculation (HRM Guide 2012).
The Institute for Public Policy Research statistics have shown that the unemployment rate of youth aged 18 is 18.5% for boys and 15.3% for girls (HRM Guide 2012). This is the highest rate they have ever witnessed in the UK. It is attributable to the current euro crisis. According to Lord Stevens, the official statistics of the unemployment rate of the youth hit the one million mark for the first time thus more than a fifth of people aged 16 to 24 years do not have jobs (HRM Guide 2012).
Causes of Youth Unemployment in the UK
Financial Crisis of 2007-2010
The financial crisis that began in the United States caused by the bubble burst in the real estate industry affected several banks .It spread across Europe since most of the banks affected were multinationals with operations across Europe. This led to economic slowdown in the economy of UK. Thus, most of the firms scaled down there production capacity.
Consequentially, employers are forced to lay off some workers or were not hiring any more employees (Ruhm 2000). The effect of such circumstances has led to the rise of rate of unemployment among the youth since they are continuously completing colleges and are unable to secure employment (HRM Guide 2012).
The Cuts in the Public Sector
The government has been reducing its spending over the years. The reduction in public sector spending leads to decreased demand of certain goods and services since the government is the biggest consumer in an economy. Therefore, due to the decrease in demand, the production sector has to reduce its production.
Thus, some people become redundant leading to sacking. Some of the firms also stop hiring new staff or reduce the number of people employed compared to when the factors of production were being fully utilized. Therefore, the cuts in public spending have led to increased unemployment rate of the youth over the recent years (HRM Guide 2012).
Immigration from European Union
Since the integration of the UK in the European Union, people are free to move from one member state to another. This encouraged many people to migrate from other member states to UK in such for employment or business purposes. This has led to reduction of summer jobs that were available to university students from UK since most of the jobs go to the immigrants from other member states. Hence, such factors have led to the rise of the number of youth who are unable to secure paid jobs (UK National Statistics 2012).
Lack of Required Qualifications
Researchers have link the lack of jobs by youths to their poor performance there studies such as in GCSE English and Maths. Most of the students have also not been able to proceed with their studies to acquire the necessary professional qualifications required in the job market thus unable to secure employment.
This is attributable to laziness from the part of the students to work hard in their academics. The support groups in conjunction with the relevant government sectors have been working hard to ensure the students work towards achieving the relevant qualifications required in the job market.
Influx of Goods from Euro Zone
After the UK joined, the European Union this allowed non-restrictive trade between member states. Such an agreement has led to the rise of goods exported to UK therefore increasing competition. This has resulted in the decrease in the demand for UK goods thus the decrease in the productivity of UK firms. They have resulted in lying down of workers and reduction in number of people employed. Therefore, this is one of the major contributions in the rise of level of youth unemployment in the UK.
The taxation rate in UK is high such that the cost of production is high. This leads to decreased demand of products thus firms end up retrenching some of the redundant workers.
Effects of Youth Unemployment in UK
Increase in Crime
The youth would need money for consumption for clothing, food or shelter and since they do not have paid job they feel frustrated and start blaming the society for their misfortunes, hence they end up resulting to criminal activities to get money. Lord Stevens acknowledged this when he said that unemployed youth would fuel disorder in the streets since dissatisfied youth lack hope for the future. He said disorder like the one experienced last year is evidence of the disquiet of youth due to lack of employment (Poverty Site 2012).
Increased Chances of Workers Experiencing Unemployment in Adulthood
The continued rise in the rate of youth unemployment increases the probability of a worker experiencing unemployment in his adulthood. The result of this the rise of number of people unemployed thus leading to increase of people claiming job seekers allowance which an increase in government expenditure in terms of transfers which is not healthy for the economy (Poverty Site 2012).
Loss of Productivity
The youth are the most active people in the society therefore when they are not employed statistics show that this equates to 10 million pounds a day of lost productivity. This translates to a direct cost of unemployed youth of close to 5 Billion pounds annually. Such statistics are worrying since this is a lot of potential wasted. The high levels of unemployment lead to too many people being idle thus high loss of productivity in the overall economy (Poverty Site 2012).
Increase in Dependency Levels
The rise of levels of youth unemployment has led to high levels in dependant population since they need basic human needs but do not have any source of income. Therefore, the rise in unemployment has increased the number of people depending on the government allowances for job seekers thus increasing the government expenditure.
Replacement of Future Jobs Fund with Apprenticeship Scheme
The labour Party government initiated the Future Jobs Fund policy. It aimed at creating jobs in the future for the youth. The Conservative –Liberal Democrat coalition government viewed this not to very effective method to address the menace of youth unemployment.
It replaced it with the current policy of apprenticeship scheme whereby the youths attached to organizations where they will be working under skilled workers thus they end up acquiring necessary skills. This policy will be more effective in solving the youth unemployment problem than the future jobs fund.
Overhaul of Schools Career Guidance
The Recruitment and Employment Confederation have proposed an overhaul of the school’s career guidance to encourage students to work hard to acquire the necessary skills for job employment. This encourages students to achieve the necessary professional qualifications necessary for employment. Such policy will lead to students being prepared to join the apprenticeship scheme thus improving the level of youth employment.
Scrapping of National Minimum wage
Dominic Raab called for the scrapping of National Minimum Wage for the 16-21 year olds people thus increasing the level of youth employment. The minimum national wage is a hurdle to organizations since they incur certain expenditure thus they end up being limited on the number of employees employed. Therefore, the scrapping of the minimum wage will lead to firms employing more people thus reducing the level of unemployment (Poverty Site 2012).
The government and non-governmental organizations have been implementing programmes that instil entrepreneurship skills in people. Such programmes have led to an increase in the level of people who are self-employed. This has led to rise of people who are self-employed in the UK over the years. It has been a very effective method of addressing the problem of youth unemployment (The Guardian 2012).
BBC News 2012, Economy Tracker. [Online] [Viewed 23 February 2012]. Available from: http://www.bbc.co.uk/news/10604117
HRM Guide 2012, UK Unemployment: Labour Market Statistics [Online] [Viewed 23 February 2012]. Available from: http://www.hrmguide.co.uk/jobmarket/unemployment.htm
Poverty Site 2012, Youth Adult Unemployment. [Online] [Viewed 23 February 2012]. Available from: http://www.poverty.org.uk/35/index.shtml
Ruhm, C. 2000, Are Recessions Good for Your Health. Quarterly Journal of Economics, 115(2): 617–650.
Seymour E.H.2005, The New Economics: Keynes’ Influence on Theory and Public Policy. London: Kessinger Publishing.
The Guardian 2012, Unemployment and Employment Statistics. [Online] [Viewed 23 February 2012]. Available from: http://www.guardian.co.uk/business/unemployment-and-employment-statistics
UK National Statistics 2012, Guide to Unemployment. [Online] [Viewed 23 February 2012]. Available from: http://www.statistics.gov.uk/hub/labour-market/people-not-in-work/unemployment