Youth Unemployment in UK - Essay Example

Youth Unemployment in UK Youth unemployment is a worldwide economic crisis, especially with the current global economic hardships. A recent report by the Office for National Statistics indicates that the number of jobless youth in the UK hit a record of 1.02 million in the quarter (Pym, 2011: 21). According to the report, which defines youth as the age between 16 to 24 years, individuals claiming allowances for jobseekers rose from 5,300 to 1.6 million in October 2011. In general, the rate of youth unemployment has gone just past twenty percent, the highest ever recorded since 1992. Some economists have attributed these results to the reeling effects of the 2009 recession to the increase in the number of youths leaving school or university. That is the convectional belief. The government of UK blames the rise in unemployment on the deteriorating job market and the effects of the euro-zone debt crisis. Chris Graylin, employment minister, gave a statement blaming the euro-zone troubles for increasing unemployment rates. Graylin called for the government to help the youth through schemes such as the government initiated work experience and work program that have placed several people out of benefits into workplaces. Lord Oakeshott, a Liberal Democrat, dismisses the minister’s view blaming the government policy of cutting spending as reason behind the rise (Shimer, 2010:45). He says that the government has been cutting its spending budget too fast and too far, pushing the rate of borrowing and unemployment high. The recent employment scheme adopted by the government, the New Deal, has the objective of reducing the long-term unemployment rates among older workers and youths. The scheme includes employment training and employment subsidies for the participants. There is need to define unemployment in order to understand the issues of youth unemployment. According to International Labor Organization, unemployment is actively searching for economic employment/ work without success. Some economic critics claim that there are jobs for the youth; it is only that the youth are not willing to work hard and are unreliable. A recent feature in the Telegram by Alasdair Palmer concerning the recent report by ONS, the author of the feature gives an example of employer from a fruit grower company complaining about the lack of English recruits in the region’s labor market (Palmer, 2011:21). The fruit grower has 300 workers in the farm, and only one is English. According to the fruit grower, the jobs are there but the English are not willing to drop the unemployment benefits they enjoy and some request to be paid cash. The author goes ahead and gives another industry where Briton youths are unemployed: bars and restaurants. According to the author, Britons youths are unreliable and rude to customers. An analyst would most likely advocate for abolition of minimum wage or temporary imposition of moratorium on it to create more employment opportunities. Nevertheless, this has not been any successful, at least in research. A research by Institute of Fiscal Studies indicates that the minimum wage system has no direct effect to the level of unemployment. The report raises concerns that withdrawal of the benefits upon taking a job and reduction of the minimum wage rate would result to inability of people to live on the offered amount sustainably (Boeri & Ours, 2008:44). According to Dr Jonathan Wadsworth from London School of Economics, the youth do not lack employment because they are work shy or because of the minimum wage. According to him, the employees are not willing to employ them. Older people already in work positions have accepted pay cuts and pay freeze in order to maintain their jobs. This means that most employees have managed to maintain their job position, resulting to the low rate of unemployment that resulted from the recession. Despite this, the result means that employers have not been absorbing new employees who are traditionally youth. Such policies are the causes of youth unemployment (Kluve,2007:147). Concerning the youths not in education, employment, or training (NEETs), the number has decreased significantly since the previous recessions of the 80s and 90s. Currently, the rate of NEETs is at 20 percent down from 25 percent in the previous recessions. There have been concerns over the role played by benefits in the youth rise of unemployment. According to some economists, youth out of employment and dependent on benefits for a long time are likely to have problems holding onto jobs and even finding one. As such, benefits are a source of blame for youth unemployment. Some economists claim that benefits discourages the youth from looking for employment because of the fact that they survive on benefits. This dependency on benefits prohibit the youth from learning habits of work. There are two major strategies sued by the governments to reduce the levels of unemployment: demand side policies and supply side policies. Demand side policies are often in times of recession and sharp rise in cyclical unemployment like after the 2009 recession. It incorporates the use of fiscal and monetary policies (Kahanec & Zimmerman, 2011:283). Fiscal policy involves increasing the aggregate demand and economic growth. This includes cutting taxes and increasing government rate of spending. The result is increase in consumption and higher aggregate demand. The rationale of this policy is that the general economy of the nation will grow strong, and fewer firms will become bankrupt thus less termination of employment. The monetary policy largely involves cutting interest rates. This results to lower lending rates and high spending increasing the aggregate demand. In general, the monetary policy encourages money supply in a country. The supply side policies for reducing unemployment involve micro-economic issues that deal with structural, classical, and frictional types of unemployment. Some of the policies applied include training and education, reducing powers of unions, and subsiding employment. Others include strict befit requirement, improving geographical mobility of individuals, and improving the flexibility of the labor market (Autor, 2009:398). All these aim to counter the imperfections resulting from the supply side factor and labor market. A possible remedy for the issue concerning youth unemployment may be imposing condition for the beneficiaries of the welfare system. Any applicant of the benefits must be willing to take on the available in order to qualify for the benefits. A good example is the US. Under the administration of President Clinton, amendment of the benefit system to incorporate condition took place. As an example, the state of Wisconsin experiences a reduction on the number of beneficiaries by two-thirds and most of the people on benefits system got jobs after the conditional policy passed Congress. The same could apply for UK, although no government has dared to implement such a policy. Critiques of the policy have raised concerns that the implementation of the conditional policy took place at a time when the economy of the US was booming, and that it would prove disastrous if applied at such hard economic times as currently prevailing. Another possible solution to youth unemployment would be embracing apprenticeship. The UK government has initiated plans to introduce 100,000 apprenticeships over the next twelve months (Jackson, 2011:21). The youths, and their parents, need to understand that not all of the youngsters are destined to be surgeons and lawyers, and embrace the new trade in labor market. Ultimately, the only guaranteed way out of the unemployment crisis is economic growth. Government should design and implement policies that will encourage economic growth, at least by two percent. Bibliography Autor, D. H., 2009. Studies of Labor Market Intermediation. London: University of Chicago Press. Boeri, T. & Ours, J. V., 2008. The Economics of Imperfect Labor Markets. New Jersey: Princeton University Press. Jackson, D., 2011. As youth unemployment hits 1m, It's time to ditch degrees in favour of apprenticeships. Retrieved on November 21, 2011, from http://www.dailymail.co.uk/debate/article-2062219/UK-youth-unemployment-figures-hit-1m-Time-ditch-degrees-favour-apprenticeships.html Kahanec, M. & Zimmerman, K. F., 2011. Ethnic Diversity in European Labor Markets: Challenges and Solutions. Cheltanham, GL: Edward Elgar Publishing Limited.pg 283 Kluve, J., 2007. Active Labor Market Policies in Europe: Performance and Perspectives. London: Springer. Palmer, A., 2011. Youth unemployment: can’t work or won’t work?. Retrieved on November 21, 2011, from http://www.telegraph.co.uk/comment/columnists/alasdair-palmer/8276212/Youth-unemployment-cant-work-or-wont-work.html Pym, H., 2011. UK Unemployment Increases to 2.62m. Retrieved on November 21, 2011, from http://www.bbc.co.uk/news/business-15747103. Shimer, R., 2010. Labor and Markets and Business Cycles. New Jersey: Princeton University Press.   Read More