Unemployment Within the Labour Market is Primarily Voluntary - Essay Example

? Unemployment within the Labour Market is primarily voluntary. Discuss Introduction Macroeconomics is a discipline that entails structure, performance and behavior of the economy as a whole. Its prime concerns revolve around analyzing and endeavoring to understand the primary determinants of the main cumulative trends in the economy with deference to overall goods and services output, lack of employment, price increases and international deals (Wyplosz and Burda 2009). In particular, this discipline carries crucial importance on the lives and welfare of every human being. Any economy that has thriving macroeconomic management should be in a position to experience low rates of unemployment and inflation with a steady and sustained economic growth and vise versa (Bade and Parkin 1983). Conversely, microeconomics is a discipline that puts emphasizes on the market behavior of individuals, consumers and organisations in the efforts to understand the decision making process of organisations and households. It is concerned with the relations of individual buyers and sellers. Both macro and micro economics play a great role pertaining to unemployment in the world especially in the United Kingdom (Wyplosz and Burda 2009) The connection between these two disciplines and policies has led to constant media attention as well as a central role in political debate (Price and Chrystal 1995). The recent slow down in the economic activity in, U.K, has raised new issues over the unemployment policy with clear evidence of failure of economic policies adopted since the election of the current government. Though there has been growth over the past few days, very little has been done in the reduction of unemployment. Concepts such as human and social capital have been used as the basis of analysis into this predicament (Wyplosz and Burda 2009). The Latest Market Analysis in UK The recent certified data on a market research in the UK market shows a great drop in the unemployment although the labour market still remains extremely weak. Elevated unemployment combined with squat growth in pays is certain to persist on the economic trend in the coming days. According, to Bade and Parkin 1983, the labour survey measure by the government there has been a notable decline of rates in jobless from 16-year high of 8.4% to 8.3% in the last three months giving way to an improved labour market. The vacancies data has also fallen as it casts doubt on whether the private sector is in a position to recruit a sufficient number of people to balance the increased rates of unemployment being experienced in the public sector. Toting up, the inflation runs at 3.5% thus affecting the pay growth that has dropped to a large extent leading to a lug on the spending of consumers and the growth of the economy though the lug is much less compared to the previous years (Taylor 2000). Concepts Human Capital and Social Capital Human capital concept denotes elaboration of the metaphorical statement, which states that education is the investment in the future. As a rule, the analytical tools that are applied to investments in this capital include a measure of stocks and rates of return to investments. This may as well be extended in order to verify the skills and knowledge applicable to an individual’s experience in the labour market (Christos 2005). Analysis carried out on the long term unemployment has proved that work experience is related to the growth of human capital. In addition, long periods of joblessness could lead to a fall in human capital, which is also known as skill atrophy. Likewise, skills can be corroded if they are not put to practice while knowledge becomes outdated if it is not updated. Thus, employment could be related to a particular set of adopted behaviours and attitudes, which include communication, punctuality, dressing mode and so on. The main effect of erosion on such behaviours is connected to prolonged unemployment (Nadiri and Arango 1981). On the other hand, Lewis and Artis 1991 argues that the concept social capital deals with the social networks through which employment contacts are made under the dependency of active participation in the labour force. Workers who have experienced unemployment for a long period of time tend to loss network with people who have job connections more so, when they are living in an area where unemployment is at its highest. Such areas are unlikely to posses the kind of social capital that is generally require in the labour market. These cyclical variations have essential consequences that are associated with the suitable stability of vigorous labour market policies (Wyplosz and Burda 2009). The prime importance of human capital, social capital and the macroeconomics environment differ over the economic cycle (Price and Chrystal 1995). This is better explained by the cyclical nature of job creation and job destruction that is experienced in the labour market. Anyone who becomes unemployed or enters the labour market through a contraction faces severe complexities. When the contraction phase ends, it is normally succeeded by a period of stagnation or by recovery in output. In either of the cases, the market rates for both; job creation and job destruction tend to be on a downward trend. These cyclical variations have essential repercussions in balancing the labour market policies (Wyplosz and Burda 2009) The Concept Unemployment Unemployment simply means lack of employment or the scarcity of it due to various reasons. There are different types of unemployment that are found in the labour market. These include, voluntary unemployment, involuntary unemployment among others (Nadiri and Arango 1981). Voluntary unemployment occurs when people are in a position to find work without difficulties but chose to look for what they perceive to be better jobs for them in terms of working conditions and payments. Conversely, involuntary unemployment occurs when people are willing to work, but they lack jobs which deny them an opportunity to work at wages that can correspond with their skills and support their daily lives. Other unemployed persons especially the youth are not interested in permanent jobs but in those jobs that they view as fulfilling their interests as well as allowing them to use their abilities (Christos 2005). In addition, it is widely assumed that the youth have the tendency of exploring when it comes to the labour market. Moreover, the level of unemployment is mostly witnessed in youth as compared to adults. Numerous researches pertaining to youth unemployment have showed that this is a problem associated with the social class and economy of a country to a large extent (Nixson and Artis 2007). Nevertheless, this does not translate to total joblessness in the labour market, but what is worth noting is that unemployment levels in the labour market is certainly a case of volunteer. With regard to some of the labour market theories, youth who have inadequate formal competence and those that are still fresh in the labour market may experience recurrent spells of unemployment primarily in the labour market (Taylor 2000). With the life experience and behavior of the youth having changed in the last few decades, there is considerable influence in the way their relationship works with their families and friends. Their experience of the education system have clearly resulted to structural changes in the labour market especially when in comes to establishing themselves on their own in the market. The Causes of Unemployment According to Christos 2005, there are diverse macro level explanations of unemployment which include seasonal, classical, structural, as well as political explanation. Political explanation stresses on the importance of political decisions, which give an explanation to unemployment. Political decisions can contribute to reduced and increased unemployment. These concerns are especially important in all politics including the labour market politics, economic policy, educational policy and social policy. Policies are capable of influencing the demand and the availability of jobs which in turn influences the unemployment rate by means of political changes (Lewis and Artis 1991). The economic perspective claims that unemployment is more or less due to a decrease in the demand for labour in the market. An increase in economy leads to further decrease in unemployment. Evaluation of unemployment policies for advanced market economies can only be examined through the predictions of the underlying macroeconomic theories. The basic is that different unemployment policy prescriptions rest on different macroeconomic theories that further outstanding stylized facts about unemployment behaviour. In essence, the unemployment rates in most of the labour markets have displayed a high degree of positive serial interrelationship. This kind of phenomenon is present in European countries including the United Kingdom (Price and Chrystal 1995). . The duration of unemployment varies widely among the market economies especially when normalizing for various unemployment rates with the past two decades experiencing increased unemployment rates Moreover, the levels of market activity in the United Kingdom labour and product tends to move in a cycle. Culpability of Unemployment in the Labour Market Culpability for the causes of unemployment has been a subject of dispute influenced by the economist approach to the market. According to the Keynesian economist, unemployment is as a result of lacking effective demands for goods and services that are available in the market, thus, referred to as cyclic unemployment (Lewis and Artis 1991). Other, economist suggests that unemployment is a mismatch that develops between demand for labourer and supply for the same which is characterized by necessary skill-set to fill the job. This has been blamed as having developed from technology or globalization. Classical or neoclassical economist have put focus on the outside factors which act on the labour market while identifying unionization, minimum wages laws, and other regulatory measures as factors that discourage workers from being hired. This is termed as classical unemployment. Frictional unemployment economists argue that unemployment is as a result of individual choices that pertain to wages and time investment. Behavioral economics highlights the concepts of sticky wages and efficiency wages as essential factors that lead to unemployment (Price and Chrystal 1995). The Concept Capitalism in relation to Unemployment Capitalism entails the division of labour and is found in most countries all over the worlds has greatly contributed to unemployment (Taylor 2000). In essence, the gap between the rich and the poor widens by day with reference to the economic growth. As much as capitalism is viewed as a driving force of economic growth, modern capitalism has brought about all manners of evils. Technology, which includes the invention of machines, has enabled the owner of the means of production to work with less labour leading to unemployment. In addition, the emergence of free market has led to the wide spread of the ‘principal of survival for the fitness’ in today’s market. This has greatly contributed to unemployment. Political economy has also been predominated by the technocratic analyses of market equilibrium and evils of capitalist oppression (Christos 2005). Conclusion With regard to Bade and Parkin 1983, the analysis of the labour market suggests that flexibility can be used to bring down the level of unemployment leading to stability in prices and reasonable rates of investment. Theories are also important in coming up with ways of working out the economic growth of any government that has the willpower to grow globally. Bibliography: Bade, R. and Parkin, M., 1983. Modern Macroeconomics. Oxford: Allan. Christos, F., 2005. Forecasting the U.K unemployment rate: model comparisons. International Journal of Applied Econometrics and Quantitative Studies, 2, 4: 57-72. Lewis, M. and Artis, M., 1991. Money in Britain: monetary policy, innovation and Europe. New York: Hempstead, Hertfordshire [u.a.]: Allan. Nadiri, M. and Arango, S., 1981. Demands for Money in Open Economies. Journal of Monetary Economics, 7, 69-83. Nixson, F. and Artis, M., 2007. The Economics of the European Union: Policy and Analysis. New York: Oxford University Press. Price, S. and Chrystal, K., 1995. Controversies in Macroeconomics. New York [u.a.]: Harvester Wheat sheaf. Taylor. K., 2000. FDI and the labour market: a review of the evidence and policy implications Journal of oxford of economic policy. 16, 3: 90-103. Wyplosz, C. and Burda, M. 2009. Macroeconomics: A European text. New York: Oxford University Press. Read More