How to Sustain Acceptable Employment Levels - Essay Example

PROJECT REPORT ON UNMPLOYMENT TABLE OF CONTENTS S.NO. TASK PAGE NUMBER TASK Unemployment - definition 3 - 6 Growing Sectors 2. TASK 2 - Full Employment 7 Ways to achieve it Disadvantages 3. TASK 3 - Benefits of Unemployment 8 - 9 Costs resulting from such a policy 4. TASK 4 - Should Government tackle the problem of Unemployment 10 - 11 Three types of Unemployment Policies/ Measures to deal with these 3 types of Unemployment 5. TASK 5 - Supply Side of Economics 12 - 13 Examples of some Governments using this methods 6. Reference & Bibliography 14 TASK - I UNEMPLOYMENT It is defined as a state of workless ness for a person fit and willing to work. It is a condition of voluntary or involuntary idleness. The state of unemployment can be attributed to many factors, external or internal. External factors come into existence with the low growth rate, falling GDPs (Okun's Law states that for every 2% fall in GDP, the unemployment rate goes up by 1 %), declining job sectors, deflation in the economy, slashing jobs or job cuts whereas internal factors can be attributed to person's own incapability to find a job due to lack of experience, skills, etc. Nevertheless, whatever the reasons may be, the state of unemployment is fatal for any person if he is actively seeking employment. Any individual at any stage can be bitten by this worm of unemployment. Unemployment also gives an indication of how the economy of a country is performing, higher the number of unemployed people in the economy more is the dipping status of the economic sector. So hereby, we see that country's unemployment status has an inverse relationship with the economic growth. The economic growth of a country is governed by inflation in the economy, which in turn is governed by the money supply in the economy. Unemployment rate = (unemployed / labour force) * 100 NSSO defines Unemployment as a situation in which all those who, owing to lack of work are not working but either seeks work through employment exchanges, intermediaries, friends or relatives or making appeals to prospective employers or express their willingness under prevailing conditions of work and remunerations. (NCERT pg 131) If we consider Milton Friedman monetarist arguments, we see that the money supply is the chief determinant of economic activities, the increase or decrease of money supply in the economy cause changes in the general price level of the economy. An imbalance in the demand and supply of money can disturb the whole economic pricing of the country. The monetary authorities should always focus on maintaining the balances, which is not an easy task, and therefore most of the countries are facing the problems of unemployment. Therefore, the root cause of unemployment is money regulation in the economy. In this new era, with the dynamic development in science and technology, we see that the levels of unemployment are governed by the price and economic growth but at the same time, there is huge disparity in the rates of unemployment, if in one part of the population, the rates of unemployment are decreasing rapidly, the other part has to face the brunt by sitting idle when they are willing to work but circumstances don't allow them. The increasing developments creates jobs for those who are A1, A2, B1, B2 part of the socio economic chart but at the same time cuts the jobs for the other part. Alas!! The situation is so ironical. However, unemployment though always mordant for the individual may be proven beneficial for the economy, it helps to control inflation and economic recession. However, the concept not only provides a safety net for people, who lose their jobs, but also pumps money into local communities and eases the effects of lay-offs. Higher the unemployment, higher will be the job valued and person's urge to stick to one job would increase, ultimately lowering down the attrition rates of the organization. Therefore, unemployment in the economy is a necessary evil for the economy. Hospitality (75) Volunteering (58) Travel & transport (1351) Science (58) Senior executive (281) Social care (562) Leisure (42) Science (58) Secretarial (771) Education (1471) Retail (69) IT & telecoms (326) Legal (83) Environment (102) Recruitment (413) HR & training (156) Health (1753) Agriculture, Fishing, Forestry697 Out of the sectors given below, I have chosen recruitment and education sector, Recruitment - Recruitment is the fastest growing sector these days than any other sector because with the increasing inflation and attrition rates, there is a need of hiring in every sector. Some sectors are facing talent crunch these days because of the increasing number of jobs and responsibilities. The recruitment sector has become dynamic with growing years. Also, the traditional role of HR in which organizations focus on hiring in quantities has changed to modern role in which they focus on hiring quality than quantity. Recruitment is no more a single staged process now, corporates have realised that with the increasing attrition rates, it is important for the companies to hire people not only with the right technical skills but also with the right personality and attitude. Most of the companies have adopted psychometric testing as an important step in their recruitment processes. The psychometric tests serve as a tool to find the personality attributes in a person and thus create right fits between the job position and the candidate profile. New trends and terms are being developed in this sector other than psychometrics, which are - e - recruitment, head hunting etc. They help to increase the efficiency and productivity of the normal recruitment process by various manifolds. Recruitment processes have been refashioned and unlike traditional organizations where anyone among the management carried out the recruitment process, now days companies have their full fledged recruitment departments. Also there are full companies/consultancies set up in order to fulfil the lower and higher level recruitment needs of their client organizations. The focus of recruitment is no longer filling up job vacancies rather it is, creating fits between the job and the individual. The individual's profile/competencies are mapped against the job requirements; after appropriate mapping is done, the individuals are hired. Moreover, to clear the left out apprehensions about the candidate, the organizations have an induction program for them that help the candidate to be familiarised with the company's environment and culture. In addition, organizations these days, go in for open and less formalized systems of recruitment to allow employees to select themselves into innovative positions in the organization. Some organizations maintain a good database of talent, so that they can fulfil the recruitment need as and when required. The candidates who are good but are not considered due to lack of vacancies are missed out opportunities. Companies maintain cordial relationships with those candidates so that at the time of crunch situations, they get immediate and ready talent, this also saves the re hiring costs. Creating good information systems is one of the precursors of recruitment, sound knowledge about the individual is important when making a recruitment decision. There are various types of jobs available in this sector. Hiring in recruitment companies in itself is the biggest hiring, there is a demand of numerous HR professionals to fulfil the needs of recruitment firms, the candidates are assigned jobs such as headhunting, screening of CVs, conducting telephonic rounds of interviews, conducting psychometric tests, business development i.e., convincing the clients why should they hire you, because ultimately their business would run successfully if they themselves would hire candidates for their companies. There are an increasing number of recruitment firms opening these days, few dealing with recruitment of entry levels professionals for their clients, other deal with middle and senior level professionals hiring. Some of the examples are MA- FOI, HEWITT, FIRST ADVANTAGE, PRO SEARCH, TRANS SEARCH, etc So this sector is a booming sector as it fulfils the hiring needs of other sectors as well, the growth in recruitment sector is fast with the increasing globalization and economy development. Education Sector It is one of the fast moving sectors today because of the dynamic changing world; the growth in the overall standard of living is contributed to the growth in education sector. The rise in standard of courses in schools and colleges has given rise to the increasing job opportunities in this sector. The diverse courses of education in schools and colleges demand large number of professionals to teach these courses. There is an increasing number of vacancy in this sector than any other sector because this sector has outperformed other sectors in terms of development. Also there have been new courses discovered in fields of biotechnology, biochemistry, horticulture etc so the demand for the lecturers and teachers to take up that course for teaching has also increased. Also with the developments in the field of education, there are new institutes and colleges developed in every nook and corner of the world which again creates job vacancies in this sector more than any other sector. The schools have increased giving in rise to more vacancies for teachers and principals. So for that matter jobs in education sector is 1471 than other sectors. The education industry is the base of all the developing industries, so it is natural that the developments in this industry would lead to development in other industries and subsequently jobs would also increase. TASK - II FULL EMPLOYMENT The full employment occurs when everyone who is willing and able to work has been able to catch hold of a job at the current wage rate. Economists believe that full employment does not mean zero unemployment. In fact, they say that unemployment rate is more than 0 % in case of full employment. It is associated with full employment rate and no one single number can be used to signify full employment. In the conditions of full employment, the economy is always producing to its maximum sustainable capacity using labour, technology, capital and other factors of production to their fullest. . The full employment can be achieved by: Creating a balance between manpower demand and supply Skill improvement has to be accompanied with job creation with more emphasis on vocational and technical training Policies required to promote growth in order to expand opportunities for employment Investments made by the Government create more and more job opportunities for employment. Monetary policies of central banks can contribute to employment generation, principally through exchange rate, interest rate and credit policies. It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now. The reason is that only full employment can balance the budget and tax reduction can pave the way to full employment. It is a viscous cycle. The purpose of cutting taxes is not to incur a budget deficit, but to achieve the more prosperous, expanding economy that will bring a budget surplus. DISADVANTAGES OF FULL EMPLOYMENT It leaves no room for business to expand by hiring more workers. At the time of full employment, an industry that wants to go in for expansion faces labour shortage because all the people who are willing and capable of working are already engaged in their job. Therefore, the companies need to either swap people to fill up the positions or distribute the work more broadly. Also, full employment comes with a shortcoming of talent stagnation, the employees are frozen in a particular position, and there is no talent available from outside thus leading to missing creativity and fresh blood. The biggest disadvantage associated with the methods of creating full employment is the high cost investment made by the Government in training and upgrading the skills of the employees, tax reductions would lead to expenditure borne by the Government. TASK - III BENEFITS OF UNEMPLOYMENT The existence of a moderate rate of unemployment can be considered good. Advantages of Unemployment for the Society Unemployment helps to reduce inflation in the economy, when there is unemployment in the economy, it means that some people do not have or have little purchasing power. So in that case, there is not much cash inflow in the economy leading to lower rates of inflation. Unemployment creates job value among the workers, since unemployment is more in the economy, which indicates that jobs are less in the economy, this way the employees will like to stick to one job. Because increasing job opportunities make the employees do job-hopping, they keep on switching jobs in search of newer and better opportunities. Decreasing unemployment rates would prevent this from happening that will serve as a great benefit for companies. It will help their attrition rates to slash down and would save their re hiring and re training costs. Advantages of Unemployment for the Unemployed Normally for the people who are willing to work but are unemployed due to some reasons get unemployment benefits which are the payments made by the Government or the employer. Government provides various monetary as well as non-monetary benefits to the unemployed people. They are provided with temporary financial assistance as and when required There is a separate insurance program for those people who are unemployed and this program is established under the state federal law. Under some situations, the tax filings of the employees are made by employers. No tax is paid by the unemployed on those benefits An unemployed person is subjected to various training programs according to his needs An unemployed is also counselled and advised by the required authorities to goof him up for newer jobs. An unemployed is subjected to entrepreneurial skills development programs in which they are taught to develop business skills. An unemployed person is initiated to work for various social programs like baby sitting, helping the NGO, old age homes etc An unemployed can reimburse 50 - 70 % of their educational costs from the Labour fund. COSTS RESULTING FROM SUCH A POLICY The unemployment benefits to the person may lead to Government or the employer bearing heavy costs. These costs include: Health Insurance costs - Access to a good health system requires a helpful insurance policy and a steady income and unemployed people do not get either. Therefore, it is entirely in the hands of Government to make sure that they are provided an insurance cover. The costs of health insurance can be borne by either Government or previous employer under various programs. However, the benefits of insurance are only valid until a limited period or until the unemployed gets employment whichever is the earliest. If the unemployed has already purchased his insurance policy then the Government reimburses this policy if the person is suffering from HIV/AIDS The temporary assistance provided by the Government as and when the person is in need builds up to high costs borne by the Government. The costs of training, counselling, coaching, and other development programs are borne by the Government. An unemployed does not pay any tax and enjoys all the tax benefits. So this cost indirectly paid by the Government. TASK - IV Government should tackle the problem of unemployment because unemployment is a liability for the economy and by giving innumerable benefits to the unemployed people, the Government is encouraging unemployment. High unemployment rates creates bad name of the country, it indicates that the economy has a low growth rate; economic recession has grabbed the country. Also increasing number of unemployed people creates menace in the economy; the unemployed people engage themselves into bad practices like thefts, burglary, robberies, etc in order to earn their living. So unemployment is always bad for the economy until the time it is not controlled and Government should frame measures to tackle this problem. TYPES OF UNEMPLOYMENT There are 3 types of Unemployment: Cyclical Structural Frictional CYCLICAL UNEMPLOYMENT - This type of unemployment occurs when there is a deficiency in demand. It is called cyclical unemployment because it varies with the variation in business cycles. This is also known as Keynesian "demand deficient" unemployment and is involuntary in nature. When there is an economic recession, we expect to see a rising level of unemployment because of plant closures and worker lay-offs. This is due to a fall in demand leading to a contraction in output across many industries. Gross domestic product is not as high as potential output because of demand failure, due to pessimistic business expectations, which discourages private fixed investment spending. Low government spending or high taxes, under consumption, or low exports net of imports may also have this result. In this case, the number of unemployed workers exceeds the number of job vacancies, so that if even all open jobs were filled, some workers would remain unemployed. STRUCURAL UNEMPLOYMENT - This type of unemployment occurs when there is a mismatch between the job vacancies and workers available, though the number of the vacancies and workers available may be the same. In this case, the workers who are available for the jobs are unfit and they lack the required skills for the job. The structural unemployment occurs with the change in structure of the economy. Example; Computers may have eliminated jobs, but they also opened up new positions for those who have the sills to operate the computers. FRICTIONAL UNEMPLOYMENT - This type of unemployment occurs when people keep on switching jobs. This unemployment is also called transitioning/search unemployment. People keep on moving in between the jobs because of increasing job opportunities. It is a type of unemployment because when a person shifts a job, he goes through a phase of unemployment before joining a new one. Example, a person who is looking for a job change has a time gap between his date of joining his new job and the date on which he left his previous employer, so this time gap can be referred to as frictional unemployment. It is the most common form of unemployment and is voluntary employment. POLICY/ MEASURE TO DEAL WITH THESE 3 TYPES OF UNEMPLOYMENT CYCLICAL UNEMPLOYMENT Cyclical Unemployment can be treated by: Improving the supply side by diversifying the companies' range of products and services in order to create more jobs for the people Reorganizing the production process - by this the flaws in the system would be identified Working time arrangements - the work time arrangements can be modified in order to create employment for everybody Changes in work organization - the work organization can be modified in order to create more jobs for labourers and making a narrower division of works role Financial concession and support - this can be provided to the workers in case of downsizing or lay offs so that their problem gets a little cushioned up. STRUCTURAL UNEMPLOYMENT Structured Unemployment can be dealt by the following measures: Providing training and retraining jobless workers to upgrade their skills so that it matches with the existing job requirements. FRICTIONAL UNEMPLOYMENT The best way to lower this kind of unemployment is to provide more and better information to job seekers and employers, perhaps through job-banks in centralized computers. In theory, an economy could also be shifted away from emphasizing jobs that have high turnover, perhaps by using tax incentives or worker-training programs. TASK - V SUPPLY SIDE ECONOMICS It is an economy theory, which states that by reducing the income tax rates and capital gains tax rates, Government can increase the growth of the economy. It focuses on increasing the supply rather than creating the demand. It is in contrast with the Keynesian side of economic (which is the demand side of economics), according to which the growth of an economy can be increased by controlling the demands of goods and services. This concept tagged along certain criticisms with it, people said that tax reductions would do nothing except increase the revenue of the Government which would ultimately again create inflation in the economy. Remedies That Supply Side Economics Put Forward To Decrease Unemployment Supply side of economics says that there will be tax reductions from the Government in order to increase the investments in the economy, these investments would bring out newer opportunities and would help in accelerating employment among the people. Therefore, this theory focuses on creating employment by increasing the supply in the economy. The theory also favours education and training of workers to make them more productive and efficient and to remove structural unemployment. GOVERNMENT THAT USED SUPPLY SIDE ECONOMICS US Government had adopted the policy of Supply Side Economics, President Bush in 2003 signed for tax cuts but this policy was opposed by various economists. They said that: "Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income." However, few people including Milton Freidman supported the policy and said that tax cuts would reduce tax revenues and would trigger growth in the economy as the people would now invest more and this result would creates jobs for the unemployed people. Supporters of the Bush tax plan point out that the predictions of the EPI article have been proven incorrect, in that the budget deficit has shrunk dramatically since 2003, and has not increased as the EPI statement had predicted. Similarly, the length of time before Social Security becomes insolvent has improved slightly, not gotten worse as predicted. But later analysis of the Bush tax cuts by the Economic Policy Institute claims that the Bush tax cuts have failed to promote growth, as all macroeconomic growth indicators, save the housing market, were well below average for the 2001 to 2005 business cycle. These critics argue that the Bush tax cuts have done little more than deprive government of revenue, increase deficit and after-tax income inequality. In the two years since that report, though, growth has remained strong, and newer numbers dispute the conclusions of the EPI report. The Bush administration points to the long period of sustained growth, both in GDP and in overall job numbers, as well as increases in personal income and decreases in the government deficit. Finally, the results of the tax cuts in the U.S. in 2001 and 2003 are mixed. While results show a temporary decline in tax receipts, they later recovered due to economic growth. In 2003, President Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003. Income tax rates were immediately reduced and rebate checks issues (without waiting for the new fiscal year). Federal revenues in FY2003 were $1,665 billion, $360 billion lower than in FY2000. Federal revenues in FY2004 were 1,707 billion, $318 billion lower than in FY2000. Federal revenues in FY2005 were $1,888, $137 billion lower than in FY2000, but by 2006 revenue had completely recovered (in inflation adjusted dollars), with receipts at $2,037 Billion, $12 billion higher than 2000. The cumulative total of federal revenues less than in FY2000 for the fiscal years 2001-2005 was $1.142 trillion, with that amount expected to be recovered by 2011, with 2012 expected to produce an additional $400 billion in excess revenue over 2000. Federal revenues include revenue from different taxes that were cut, stayed the same, or were raised. For example, the Social Security FICA tax rate stayed the same while the maximum income subject to the tax was increased each year, resulting in a tax increase for those earning more than the previous limit. Social Security tax revenues increased each year. Including increasing tax revenues from taxes that stayed the same or were increased hides the magnitude of the revenue decrease in taxes that were cut. Income tax rates were cut and income tax revenues were lower than the FY2000 level every fiscal year from 2001-2005, a cumulative revenue decrease of $640 billion (measured in nominal dollars). However, by 2006 revenues exceeded the 2000 level. Likewise Corporate income tax rates were cut and revenues were lower than the FY2000 level each fiscal year from 2001-2004. But, by 2005 the inflation adjusted take exceeded that of 2000 by over 20%, and by 2006 nearly 50% higher. REFERENCES AND BIBLIOGRAPHY: www.wikipedia.com www.answers.com www.qualityinfo.org Pg. No. -131 NCERT BOOK OF ECONOMICS FOR CLASS 11TH , HARI VASUDEVAN - Prof. Calcutta University Read More