Unemployment

Unemployment :

In this note we consider in more depth the causes and consequences of unemployment. After more than a decade of decline in the unemployment rate and the number of unemployed in the UK economy is on the rise again, and this sheds some light on the economic and social impacts of the people they were unable to find paid work.

Measurement of unemployment in the United Kingdom

Claimant Count

Claimant count includes those people who are eligible to claim jobseeker's allowance in (JSA). Claimants who meet the criteria for receipt of JSA for six months before moving to the private recruitment procedures. Are not included, but do not meet all the criteria, and therefore the claim in - one problem with the count demands that it excludes many people who really want to find work and who might have searched for work in the recent period of unemployment count. In 2003, the average number of unemployed 933,000 or 3.0% of the workforce

Some basic labour market definitions

Unemployment rate: = the percentage of the workforce that is recorded and the unemployed
   Manpower: = number of people in employment for the unemployed registered +
   Working population: = number of working-age population(estimated in 2002 to be 36.5 million)
   Participation rate: = percentage of the population who work in the labor force

The Causes of Unemployment :

Frictional unemployment :

This is the unemployment voluntary or transitional due to people moving between jobs: for example, workers refined recently, or for workers who enter the labor market for the first time, such as graduates and school leavers take a long time to find jobs in the wage rates they are willing to accept. Many of the unemployed frictionally unemployed for a short time while participating in the search for work.

The information can be incomplete in the labor market leads to frictional unemployment if the unemployed are not aware of available job opportunities. Often be localized failure of this information - a survey of workers in some of the vacancies available in different sectors of the economy as a whole, they tend to restrict their search for work for the local area. Geographical mobility in the United Kingdom, as well as in the EU less than it is in the United States, for example.

Incentives to find work are also important! Some people may choose not to accept the job at the prevailing market wage rates if they believe that the system of income tax benefit and will reduce the net increase in income can we expect from people with paid work. These are referred to the problem as the unemployment trap.

Structural unemployment 

Structural unemployment that occurs when they are unemployed because of the "replacement of capital to labor," which reduces the demand for labor in the industry, or when there is a decline in demand for long-term, which causes redundancy and lay off workers. Structural unemployment, where there is a "match" between the skills and requirements of new jobs. 

And skills required to deal with structural changes in output and employment 
  Structural change is a constant feature of the flexible economy.The decline in some sectors, even in other sectors - which require different skills - will expand. The pace of technological change and global integration and increasing demand for highly skilled labor force more, with the ability to adapt to changing technologies and shift the demand for products. 

I have found many of the unemployed steel, coal and heavy engineering hard to get back to work without retraining. This problem is one of the inertia of professional employment. The continued decline in long-term industrial employment (a process known as deindustrialisation) and there was a significant shift in service jobs, particularly in, and banking and financial services and insurance services, other commercial and distribution, hotels and restaurants. 

 Employment programs to reduce unemployment

The focus of the government's New Deal program of the Workers' Party (www.newdeal.gov.uk) attempts to reduce the long-term unemployment by increasing the human capital of the unemployed and to improve their employability in the eyes of potential employers.It also aims at a new agreement to bring people into the labor market who have abandoned the active search for work. These "discouraged workers" long-term unemployed who were out of official business for several months and which encourage their participation in the search for a job has fallen to low levels. There is often a "set 22" in the labor market. It is hard to find a new job without experience, but experience can only come from getting a job related.

Cyclical Unemployment

Cyclical unemployment is "the demand is weak," or involuntary unemployment due to lack of aggregate demand. It is also known that it is the Keynesian. When there is a recession, we see high rates of unemployment due to plant closures and layoffs. In the fall of AD is shown in the diagram below takes the left hand of the economy away from full capacity of national, and leads to a negative output gap in real GDP under the potential GDP. Because the work may demand derived from them, as well as a decline in real GDP leads to a contraction in total employment. 

Voluntary and Involuntary Unemployment

This is an important distinction should be noted voluntary unemployment among workers when it chooses not to accept a job in the rate of wages and involuntary unemployment going that occurs when the worker would be willing to accept a job in an ongoing wage but can not get this offer.

Classical unemployment is the result of real wages being above the level of information exchange in the market, which leads to increase the supply of labor. Some economists believe that the minimum wage to create the national unemployment risk in industries where global competition from low-cost producers severe.

Consequences of Unemployment

To many economists, and persistent unemployment is a sign of market failure because of unemployment is a waste of scarce resources, and leads to loss of potential output and a decrease in the efficiency of the allocation. Economy is operating under maximum output can be achieved. This may be illustrated by taking advantage of the PPF, or by using the concept of the output gap.

When unemployment rises, for example, during the recession, GDP will contract and the real economy will be less than the full operational capacity. And become the output gap appears in the chart below, notice how during the Depression through the early 1990s, and negative and the unemployment rate rose to 10 per cent of the workforce. And began recovery time unemployment has become entrenched, and descent, and the economy is moving towards macroeconomic balance with the closure of the negative output gap. 

Around the turn of this decade, it was estimated that the UK economy to be running very close to its potential level, with real GDP growth of slightly more than the trend rate of 2.5% per year.Drifted lower rates of unemployment, mainly as a result of successful attempts to bring down unemployment, structural and friction. And the gap in GDP in 2005, but there was a marked economic slowdown, once again negative, and we started to see the unemployment rate is higher than the edge. No recession, but we saw again cyclical relationship between the growth of output and unemployment rate. 

There are more costs associated with high unemployment or high output as well as simply lost. 

Resources invested in waste-repetition training and education of workers and every person is a period of time without work, and the greater the loss of skill and motivation. A high rate of unemployment in the long term a negative impact on the ability of any country on economic growth. High unemployment rate also affects the government's ability to finance with high spending on unemployment benefits and other social welfare payments in addition to lower revenues from income tax and national insurance and VAT. There is also a strong correlation between unemployment and consumer spending. Such as the consumer confidence index from falling, and therefore the desire of people to spend declines and people are building their savings and precaution. 

The effects of slowdown 

Describes the impact of the slowdown as a result possible in a country suffering from persistently high rates of unemployment in the long term. Slowdown means "to be behind" as they relate to the economic costs of unemployment because of the damage inflicted by unemployment and employment skills of these people are unemployed. Longer a person remains unemployed, wage labor, they become less attractive to a potential employer. Erosion can become technical and social skills. Corrupt incentives to prolong the job search and the final result could be an increase in the rate of unemployment "core" structural and the consequent rise in the natural rate of unemployment. 

Overcome the problem of the slowdown is now a major political issue within the European Union where many countries suffer from extremely high rates of unemployment and harmful, much of which is the long-term in nature. 

The social costs of unemployment 

Is associated with high rates of unemployment to the social deprivation that leads to negative externalities. There is some relationship to the crime, and other aspects related to social disintegration (for example by increasing divorce rates, and deteriorating health, low life expectancy). Areas of high unemployment and the continued decline in real income, see the inequality in income and wealth. Can become very difficult and expensive to reverse the decline in the localities where unemployment rates are incredibly high, and where the jobs and the poor. This is still a major problem of social and political in the United Kingdom in spite of overall progress in reducing unemployment. 

Possible benefits from unemployment

One advantage of the high rate of unemployment is that it helps to keep the inflation rate has fallen since a year and is often associated with high rates of unemployment with a decrease in the bargaining power of workers in an attempt to increase the wages and salaries. There may also be environmental benefits if the unemployment rate is tied to the slower rate of growth of consumption and production, and reduce pressure on scarce environmental resources. Can also be the presence of some of the unemployed in the sense of friction is useful because it means that there is a group of unemployed workers who can take new jobs as they become available. But this depends on these workers, there is sufficient geographical and occupational mobility. Full employment in any economy is unlikely to be achieved. 

Government Policies to Reduce Unemployment

The government has no specific target for a given rate of any unemployment. Instead, the goal is expressed in the labor market in terms of ambition and wide to maintain high employment and provide job opportunities for all. 

It can make a distinction between demand and supply sides of the policies to improve work in the labor market in matching people to jobs available and the changing demands and requirements of different industries. Inevitably there are limits to what government can do to achieve sustainable reductions in unemployment rates.And often can not be a policy that is offered to support the labor can be expensive and involve opportunity cost. 

Reducing occupational immobility of labour (supply-side policy)

Deadlock in the work is the reason for the failure in the labor market and structural unemployment. Policies to reduce this problem the goal to provide the unemployed with skills they need to find re-employment, as well as to improve incentives to find work.Improvements in the availability and quality of education and training in the workplace to increase the human capital of unemployed workers and help ensure that more of the unemployed and the skills appropriate to address the employment opportunities available. For many years, was seen as the relative scarcity of the workplace, training, and a weakness in the labor market in the UK. Have employers and employees alike actually underestimate the value of long-term training in terms of potential benefits for business and long-term gains to the worker. May free-rider problem also contribute to the level of sub-optimal training point of view of society

Benefit and tax reforms (supply-side policy)

To some economists, a policy that may reduce the value of welfare benefits to increase incentives for the unemployed to take jobs.Evidence derived from recent experience in the UK is that the value of payments cook the welfare state in fact there is a big difference in the level of unemployment in the long term. It is rare that the root cause of the person to remain outside of work is the possibility out of the generous welfare charity work. Have measures instead, aimed at improving the incentives of people, including the link between welfare benefits to participate in real programs work experience, which is part of the New Deal or the introduction of lower marginal income tax rates for persons of low-income by contrast have a significant impact . 

Reflating aggregate demand (demand-side policy)

The government can use conventional weapons to macroeconomic policies designed to increase AD and generate the highest level of national income and employment. And Reflationary policies can help mitigate the effects of economic recession, but there are risks involved in the use of both fiscal and monetary policy to boost demand simply when he came out low. 

The government can also take advantage of a more effective regional policies to encourage inflows of foreign investment from multinational companies, particularly in those areas and regions where unemployment is consistently higher than the national average. The main weakness in relying heavily on demand management policies to reduce unemployment is that unemployment often is not cyclical, it is friction and structural in origin and can not be solved simply by pumping huge amounts of money in the circular flow of income and expenditure. 

Employment subsidies (demand-side policy

And government support for companies that take on the unemployed in the long term create an incentive for companies to increase the size of their workforce. Employment subsidies may also be available to companies abroad in the United Kingdom to locate in areas of below-average economic prosperity.

Summary:

The current government strategy of the labor market is the first to rely on monetary and fiscal policy to maintain a stable rate of economic growth as a precondition for high and stable levels of employment. The macroeconomic stability as a prerequisite for creating the right climate in which new jobs became available.Second, supply-side policies and effective strategies especially the labor market such as New Deal, welfare and other educational reforms, and given the highest weighting in the quest to reduce the structural aspects of the problem of unemployment. 

Britain's economy has achieved significant progress and substantial reduction in unemployment over the past fifteen years.Despite the recent upturn in the rate of unemployment (due to a slowdown in growth) in the UK is still one of the lowest unemployment rates in the European Union. 

Key Points:

v  Unemployment occurs when individuals unemployed, but the desire and ability to work in the wage rate constant. Official figures of the government only the number of people who register, the unemployed and actively looking for work.

v   Discouraged workers who want to work but gave up because they decided to look hopeless - many who suffer from long-term structural unemployment.

v   The unemployment rate declined in the United Kingdom almost continuously from the summer of 2003 to the beginning of 2005.Since then there was a slight improvement in the rate of unemployment at the expense of both the plaintiff and the Labour Force Survey measure. By the summer of 2006, the unemployment rate rose to its highest level in four years.

v   Unemployment and the causes of the demand on the supply side.Can some unemployment may be due to voluntary decisions of people in the labor market, but most of involuntary unemployment 

v  Economic and social costs of unemployment when unemployment is the greatest long-term

v   There are strong links between high rates of unemployment, inequality and relative poverty risks for households where there is no one in paid work. Unemployed tend to have some of the lowest income levels in society.