Unemployment in UK

Introduction

Unemployment is defined as a situation in which a person or people are willing to work but cannot find work in the job market. It remains one of the greatest challenges in economies globally. The reasons behind the increase in unemployment rates in the whole world are not particularly hard to discern. The recent economic recession and poor policies in regard to employment has made employment an elusive aspect of development index in major economies. The United Kingdom is not left out in the bracket among develop nations struggling with the challenge of employment. In fact, recent statistics and data demonstrate that employment has hit a record high in the recent decade in the United Kingdom than in comparison to the rates in the past decades. This has been precipitated by the policies that fall short of achieving objectives of economic improvement and ensuring that citizens have access to employment opportunities.

Types of unemployment

Economists separate employment into there types; Frictional unemployment, Structural unemployment and Seasonal unemployment. According to Moffatt (2010), Structural unemployment is an unemployment that comes from there being an absence of demand for the workers that are available”. This type of employment is very closely related to demand deficient employment and is precipitated by two major changes in that cause absence in demand for workers n a particular industry. These include changes in technology and changes in tastes. Moffatt (2010) elucidates this reason for structural unemployment by stating that “as personal computers replaced typewriters, typewriter factories shut down. Workers in typewriter factories because unemployed and had to find other industries to be employed in.” the change in tastes has also influenced structural employment in that goods and services that are no longer in demand in the market are phased out and workers within such industries lose their jobs.

Structural unemployment has been pat and parcel of the United Kingdom just as it has been in the rest of the developed world. This is because of the adoption of technologies that have revolutionized the workplace culture. The advent of computers has consumed roles that were traditionally taken up unskilled labor thereby rendering many citizens of the United Kingdom jobless. It has been advanced that this type of unemployment remains the biggest challenge to attack in the market given the advantages of technology in the workplace. According to Moffatt (2010) “structural unemployment poses the biggest challenge to the United Kingdom’s economy.”

Frictional unemployment, on the other hand, refers to unemployment precipitated by the advance in careers and locations. According to Moffat (2010), “frictional unemployment is unemployment that comes from people moving between jobs, careers, and locations.” The major precipitating factors behind this type of unemployment include change of careers for different reasons, fresh graduates entering the workforce and increase in the number of citizens entering the workforce after rearing their children. The above factors have greatly impacted on the unemployment landscape of the United Kingdom given the fact that fresh graduates leave schools and colleges every season destined for the job market. According to Geoff (2006), “newly redundant workers or workers entering the labor market for the first time such as graduates and school-leavers take time to find jobs at wage rates they are prepared to accept have increased in the recent past in the United Kingdom”. This, therefore, points to the reason behind the increase in unemployment rates in the recent past.

The last type of unemployment is seasonal unemployment which refers to unemployment due to changes in the season – such as a lack of demand for department store Santa Clauses in January and is a “form of structural unemployment, as the structure of the economy changes from month to month” Moffatt (2006). Whereas this type of unemployment exists within the United Kingdom’s economy, its impact on the overall rates in unemployment is not as great as the previous ones.

Social and Economic Consequences of Unemployment in the United Kingdom

It can be discerned that there are negative social and economic costs of unemployment in any market. In the analysis of the United Kingdom, high levels of employment indicate an economy that operates on the output levels. This fact is buttressed by Geoff (2006) in stating that “to many economists, persistent unemployment is a sign of market failure because unemployment is a waste of scarce resources and leads to a loss of potential output and a reduction in allocative efficiency.” When unemployment is rising, the national output is contracting because of the reduced purchasing power of the citizens. In the graph below, during the great depression of the 1990s, the output gap recorded negative as unemployment rate climbed to a record ten percent of the total labor force.

Retrieved from Geoff (2006).

Another economic effect of unemployment is the hysteresis effects. Thos refers to the damage unemployment does to the skills and employability of the populations out of work. According to Geoff (2006) “the longer someone remains out of a paid job, the less attractive they become to a potential employer because of the erosion of technical and social skills.”

The social costs of unemployment are related to the social deprivation that results to negative externalities. According to Geoff (2006) “there is some relationship with crime, and other aspects associated with social dislocation (for example via increased divorce rates, worsening health and lower life expectancy) in that areas and regions of persistently high unemployment see falling real incomes and a worsening in inequalities of income and wealth.” It is always a big challenge to reverse the trends in unemployment rates. This problem in the United Kingdom is demonstrated by Geoff (2006) in stating that “this remains a major social and political problem for the UK despite the general progress in reducing unemployment.”

Government Policies to reduce unemployment

Economists abide in one that the United Kingdom’s government does not have a specific target in addressing the challenges in unemployment within a given area. The central objective of the UK government is therefore to keep employment high and thus effectively provide employment opportunities for all its citizens. These involve the application of demand side and supply-side policies. These are aimed at “improving the working of the labor market in matching people to the available jobs and to the changing demands and requirements of different industries” (Geoff, 2006). The major challenge to the UK government is that all these policies that are aimed at boosting the economy always involve opportunity costs.

Supply-side policy

Structural unemployment and labor market failures are the chief precipitants of labor immobility. The United Kingdom government has instituted “policies aimed at reducing this problem aim to provide the unemployed with the skills they need to find re-employment and also to improve the incentives to find work” (Geoff, 2006). The overall improvement of educational opportunities and relevant trainings in the workplace has the added benefit in that it improves the levels of human capital. However, there has been a concern in the United Kingdom’s workplace market because weaknesses in its workplace training programs. The above points demonstrated the supply side policy in addressing the problem of unemployment in relation to the reduction in the occupational immobility of labor.

The second supply-side policy is the benefit and tax reforms which are aimed at increasing the incentives to lure the unemployed into taking up jobs. According to Geoff (2006) “the evidence drawn from recent experience in the UK is that simply cutting the value of state welfare payments in reality makes little difference to the level of unemployment in the long run.” Examples of benefit and tax reforms initiatives as illustrated by Geoff (2006) include “the linking of welfare benefits to participation in genuine work experience programs which is part of the New Deal program or the introduction of lower marginal income tax rates for people on low incomes might by contrast have a noticeable impact”.

Demand Side policy

The demand-side policies that have been instituted by the United Kingdom’s government to address the challenges of unemployment include reflating aggregate demand and the provision of employment subsidies. The UK government has made wide application of macroeconomic policy aimed at increasing aggregate demand and thus generates high levels of national income and provides more employment opportunities. “Reflationary policies can help to mitigate the effects of an economic recession but there are risks involved in using both fiscal and monetary policy simply to boost demand when output is low” Geoff (2006). On employment subsidies, the creation of subsidy policy on businesses that take on the long-term employed increases the number of their employees. This includes overseas firms that are located in the UK regions that are economically weak.

UK Employment and Working-age rate in the Past recent Months.

Statistics from the UK Bureau of Statistics reveal the UK recorded increase in employment opportunities in the 2008 after the credit crunch.

It can be seen that UK unemployment rate declined sharply after the 1900s great depression. This was because of the economic growth recorded and the availing of sickness and disability allowances. In addition to the above, depressed areas such as South Wales and North East have found new investment areas that have replaced the traditional manufacturing industries. It is however a fact that British economy has recorded significant progress and reduced unemployment in the last fifteen years. This is reason behind its low unemployment rate in the European Union.

Conclusion

It can be clearly seen that unemployment still constitutes one of the major challenges to the UK government to date. While its labor market relies on monetary and fiscal policy aimed at economic growth, the unemployment challenges still exist. Some policies have recorded success while others have come at very high opportunity costs.