Unemployment and Government Intervention Strategies - Research Paper Example

? Unemployment and Government Intervention Strategies Unemployment and Government Intervention Strategies Unemployment is a situation whereby people willing to secure employment at certain payment rate available do not actually work. This is despite their vigorous search for a job. It is worth noting that unemployment figures do not capture the numbers of people who display passivity in search of an employment (Baumol and Blinder, 2011). The rate of unemployment is increasing in United Kingdom. The Office of National Statistics released figures unemployment rate in March 14, 2012. The report reveals that unemployment rate rose to 8.4 %. This is the highest unemployment rate captured since the year 1996. The report further indicates that the statistics of citizens without employment hit a record of 2.67 million in the period between November and January. This increase by 28,000 unemployment numbers was recorded in October in 2011. Moreover, this report shows that unemployment figures in the year 2011 was higher by 148,000 as compared to the year 2010. There were also noticeable differences in unemployment figures between men and women. The number of jobless men was 1.54 between November and January. That of women without employment was 1.13 million in the three months period (Office for National Statistics, 2012).). According to the Office of National Statistics, the number of people claiming Jobseekers Allowance in December 2011 hit a 1.6 million. This number marked an increment of 1,200 from the unemployment Data collected in October. The report asserts that the number of young people aged 16-24 and seeking employment increased to a new record of 1.043 million (Office for National Statistics, 2012). With greater numbers of employees, lay-offs in the banks, public sector, and private sector the unemployment situation in UK may aggravate. This is a matter of urgency concern and the governments in UK should take sound interventions to curb it. Cost of High Unemployment on a Country’s Economy Persistently, high unemployment creates huge costs for individuals and the economy of a nation as a whole. Some of costs are difficulty to value and measure, especially the long-term social costs. The economy as a whole suffers because national product falls as a direct consequence of the inability of the market to equalize the marginal products of equally productive labor. Unemployment presents a waste in national scarce resource. The economic output could be higher if the unemployed are at work. It leads to poverty for those people without an employment. Therefore, unemployment is an indicator of nation’s poor economic performance (McEachem, 2011). Unemployment has both private and social cost. To start with, it is a source of stress and ill health to many people. Without a stable income, individuals cannot afford basic health care. This means that an individual cannot get better medical treatment. This results to lower life expectances. Individuals die either out of disease complication or out of incapability to afford proper diet. Second, unemployment destabilizes the living standards of individual. Jobless individuals cannot cater for the basic needs of their families. Inability to provide for the family may lead to homelessness, misunderstanding, divorce, and indebtedness (McEachem, 2011). Third, joblessness leads to loss of skills necessary for individual development. Individuals who stay away from work environment do not have an opportunity to hone their skills to respond to the current labor demand. The prowesses of unemployed individuals lose applicability due to changing trends in the labor market (Kitson, 2010). This in turn can lead to skepticism and pessimism about the true meaning and value of education. This can change individuals to have a narrow focus on education and training. It therefore means that an individual will be less willing to invest in the education system of a nation. The quality of education will dwindle robbing the country its potential human resource. Fourth, the unemployed citizens cut their real spending since they can only purchase the necessities. This means that the affected individuals contribute less in payment of taxes. The individuals have difficulties to meet their mortgage repayments. Moreover, the unemployed individuals have increased tendencies of suicidal attempts. Rising unemployment rates pose some social problems. Jobless people do not have a stable source of income. Since these people have to continue with their lives the only feasible options is top turn into criminal activities. This creates insecurity in the area affected. Unemployment contributes to escalating figures of poverty indices. Children cannot access quality education and other essential services. Unemployment creates income inequality among the members of society. This is a source of social prejudice and the financially well-off individuals become the targets of criminal activities. Further, the jobless individuals engage in brutal activities (Smith, 2003). The economy of a nation bears the brunt of unemployment. To begin with, a nation looses significant amount of income tax. This implies that the government cannot levy income tax to the jobless population. This disrupts the national economic plans for a given nation. Second, the nation losses the national contributions on insurance that comes from both employers and employees. This is a strong blow to the nation’s economic growth. Third, the government losses value added tax. This is because the employees have a low purchasing power hence they have little spending. This affects the government spending, taxation, and nation’s level of borrowing. It increases the cost of unemployment benefits. The negative impact of this is to strains an economy of a country. There is increase in the cost of nation’s social security support payments. This is because it is a nation’s mandate to protect and care her citizens across all ages (Smith, 2003). Persistent lack of employment affects the health service, police, and prisons service. This is because these services depend on taxes that come from the citizens in employment. It means that the government experiences budgetary deficits. Pushing the government’s budget position towards deficit means that the nation will source funds from outside through borrowing. The borrowed funds have high interest rates. High levels of unemployment lead to social unrest. The unrest affects virtually all the operations of a nation (Kitson, 2010). Policies to Reduce unemployment The responsibility to reduce unemployment rate lies in the individual nation government and the stakeholders of economy. Making of sound economic policies is a prudent way to rescue a nation from biting effects of unemployment. The government can expand its fiscal policy. The government should increase its spending of taxpayers’ money. The main aim of this spending is to increase demand for labor. This then will call for demand for workforce to produce goods and services. This policy has a direct effect on equilibrium national income. The government can raise current expenditure. For instance, the government can increase pay levels in education and health service. Similarly, the government can expand spending on capital projects such as spending on new road construction, new hospitals, and other infrastructural activities (Baimbridge, et al, 2008). The government can lower the direct taxation. This encourages consumer to spend more to acquire goods and services. Tax reduction increases consumers’ disposable income. Likewise, the monetary policy can be relaxed through lowering rates. This encourages demand for credit, reduces saving, and consumers disposable incomes. This will increase consumption and demand. In addition, it provides an opportunity for customers to invest. This is because the marginal costs of investment fall (Vidler and Grant, 2003). Alternatively, the country can reduce the unemployment rate devising supply side policies is crucial. The policies should focus on product market there is production of goods and services. The policy should also focus on the labor market. Flexibility in the labor market will enable job seekers to get a job that matches their skills. This is because the supply policies increase the need for workforce. In this situation, employers tend to place orders and advertisement inviting for new employees. The aim of the supply policies is to cut down the structural unemployment (World Bank, 2006). The bank of England employs the monetary and supply-side policies. Each month the bank announces whether it will change the bank base interests. The emphasis is on the control of money supply and the total stock of money on economy. The bank constantly reviews the policies with the emergence of new industries and death of old industries. The aim is to keep a high economic growth. This is because fast economic growth creates new jobs and hence maintaining the jobless figures low. The policies stimulate aggregate demand for labor and hence reduce unemployment. The injected demand magnifies the final impact of Gross Domestic Product (Baimbridge, et al, 2008). References Anderton, A. (2006). Economics. New Delhi: Pearson Education India. Baimbridge, M., et al. (2008). Britain, the Euro and Beyond. London: Ashgate Publishing, Ltd. Baumol, W., and Blinder, A. (2011). Economics: Principles and Policy. New York: Cengage Learning. Baumol, W., and Blinder, A. (2011). Macroeconomics: Principles and Policy. New York: Cengage Learning. Blakemore, K., and Griggs, E. (2007). Social Policy: An Introduction. New York: McGraw-Hill International. Brue, S., and McConnell, C. (2006). Economics: principles, problems, and policies. New York: McGraw-Hill Irwin. King, S., et al. (2011). Principles of Economics. New York: Cengage Learning. Kitson, A. (2010). Unemployment, the Cause and a Remedy. Charleston: Nabu Press. McEachem, W. (2011). Economics: A Contemporary Introduction. New York: Cengage Learning. Office for National Statistics. (2012). Release: Labour Market Statistics, March 2012. Retrieved 11 Apr 2012, from http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/march-2012/index.html Smith, S. (2003). Labour Economics. London: Routledge. Sunley, P., et al. (2011). Putting Workfare in Place: Local Labour Markets and the New Deal. New Jersey: John Wiley & Sons. Vidler, C., and Grant, S. (2003). Heinemann Economics for Edexcel. London: Heinemann. World Bank. (2006). The World Bank Research Program 2004: Abstracts of Current Studies. Washington: World Bank Publications. Read More