Measuring Unemployment in the United Kingdom - Report Example

Unemployment in the UK July 23 Evaluate the different economic explanations of the current level of unemployment in the UK, discuss the economicand social costs and consider the policy measures available to the government to tackle the problem Business Economics Contents Contents 2 Table of Figures 3 Types of Unemployment 4 Measuring Unemployment in the United Kingdom 5 The Economic and Social Costs of Unemployment 6 The Policy Measures Available to the Government to Tackle the Problem 7 References 9 Table of Figures Figure 1: Labor Market Indicators (Statistical Bulliton, 2010) 6 Figure 2: Unemployment in the UK (Tutor2u Limited, 2006) 6 Unemployment is defined as a curse and the wastage of skills, time and social values which result in frustration, depression and social or economic disaster (Lund & Pedersen, 1985). According to a report of 2007, unemployment in the United Kingdom reached to 10, 00000. The report reveals that the applications in 2007 for Jobseeker’s Allowances were around 835,800 that is not a good sign (Economics Help, 2007). Unemployment not only impacts an individual’s life and living standard, but it also affects the mind of jobless person. Types of Unemployment To understand more about the unemployment in the United Kingdom, it is of vital importance to elaborate the different types of unemployment. The types of unemployment indicate the causes of unemployment in any country. There could be many reasons or causes for the unemployment. In this paper, the causes and types relevant to the unemployment in the UK are discussed. Below are three common types of unemployment: Cyclical/Keynesian or Deficient-Demand Unemployment: This type of unemployment is associated with the Gross Domestic Production (GDP). In this type of unemployment, the rate of unemployment goes up when the GDP goes negative. Frictional Unemployment: Frictional unemployment occurs when a change in location, position/role, opportunities and career or in any other aspect takes place. Structural Unemployment: It is when demand of specific labor is less and supply is high. It occurs when opportunities are less but the candidates are many. Other kinds explained by different researchers are also defined below: Seasonal Unemployment: As obvious with the name, the seasonal unemployment refers to the seasonal opportunities. As the businesses related to the hotel reservation have some peak seasons. Their businesses are at peak in vacation months like December. February is mostly their off season. Long-term Unemployment: If a person is unemployed for more than one year, his employment type is said to be the long-term unemployment. Hidden Unemployment: People get frustrated when they constantly struggle to get jobs but unfortunately, they fail to obtain suitable positions. After some time, frustration makes them hopeless and government do not really count them so they are not reflected in the statistics. Such state refers to the hidden unemployment phase. Measuring Unemployment in the United Kingdom The claimant count and the labor force survey are the most successful and accurate ways to measure unemployment (Gillespie, 2007, pp.347-60). The claimant count refers to the number of applicant applying for the Jobseeker’s Allowance. However, it is not possible that all clamant applicants get successful. Due to the rigid requirements, one can fail to claim. Such applicants cannot be reflected in the total claimant count therefore, it is necessary not to just rely on this record. Another way to measure unemployment is the labor force count (Worswick, 1991, p.15). This way is quite reliable than the first one, only because this way, interviews with the help of people in measuring individuals who wish to do some job, but are not getting jobs (Gillespie, 2007, pp.347-60). According to one of the reports of 2010, it has been noticed that in the mid of 2010, the claimant count fell significantly to a fifteen month low of 4.5% (Shaikh & Fincher, 2010). The labor force statistical report was disclosed in July 2010 indicated that: Figure 1: Labor Market Indicators (Statistical Bulliton, 2010) Figure 2: Unemployment in the UK (Tutor2u Limited, 2006) As discussed above, the claimant count is not that reliable, above graph reveals the same. Due to specific criteria and documentation, it is not necessary that all jobless people get successful in getting allowances. Therefore, difference in both results is certainly expected. The Economic and Social Costs of Unemployment A state is said to be successful when the unemployment rate is quite low. National income is calculated on the basis of the overall estimated income of all citizens. An ideal citizen is the one who contributes economically by the mean of generating income in any manner by any legal way. Those who generate income by unfair means are excluded as no matter how much income they generate, somehow, they harm others. An employee who works somewhere not only generates revenue for his living, but he also contributes in aggregate GDP. An unemployed citizen is just like a liability for the state. He is just like an employee of a company who takes handsome salary, but is not productive at all. As one way or another, country bears cost of all its citizens. Unemployed citizens are not only considered a threat to a country’s economy, but they could be an open threat to the society because unemployment encourages criminal activities. This is the reason behind taking unemployment very seriously. An empty mind is the house of evil. An unemployed person feels depressed and his depression, failure and stress convert him into a negative thinker. Such people can also get involved in activities that may harm others. Consequences of unemployment could be as severe as poverty and economical instability. Poverty makes a person frustrated as it prevents one to fulfill his basic needs. A poor person feels misfit and awkward in society and avoids parties and gathering. An unemployed man faces financial crises and can hardly run his family. Ultimately, this can insecure his marital status as well. In many cases, unemployment creates distance between couples. Unemployment creates numerous social issues as well. However, people should not give up as a good citizen is a person who tends to contribute in the aggregate social and economical performances. The Policy Measures Available to the Government to Tackle the Problem Method like working trial was identified as a useful source in order to help the citizens finding the right job for themselves (Miller, 2001). Another useful solution to reduce unemployment is to have efficient job centers that can help the jobless people in getting the right and suitable job (Miller, 2001). Government must also pay attention to the employment subsidies for employers as this can also contribute to meet the problem. The aspect of training and development is also taken seriously to increase the number of specialists. If a country has been facing problem of high wages, it basically means that the workforce is demanding high salaries. Organizations are influenced to pay high salaries due to their demand of skilled workers. Wages are high where supply of skilled workers is less. To control this effect and to reduce unemployment in a country, it is of vital importance to train and educate the citizens for professions that are in demand and are high paying. Supply of skilled and specialized workers to such sectors can create competition in market. This can lower the unemployment and can also control the problem of high wages. In the United Kingdom, as per a few reports, it has been noticed that bonuses fell down and a few giants also cut down the wages. Angela stated in her report that “Weekly wages fell at the fastest rate in 60 years in February as City bonuses were slashed and workers agreed to reduced hours in the wake of recession, the latest official figures show” (Monaghan & Conway, 2009). Governments lower formalities so that to encourage the foreign investments. This way, they receive positive results in reducing rate of unemployment. Each project brings a lot of vacancies and opportunities. Collaborations and ventures are important to help this problem. Rather than increasing taxes to maintain jobless account heads, government should pay attention to increase job centers and training centers and should be attentive in launching projects and creating tough competition in the job market. To reduce the rate of unemployment and to encourage the unemployed citizens, policies should be designed to promote entrepreneurship and the growth of small-medium size enterprises by issuing easy loans and reducing taxes. Import and export should also be made easier. As far as the monetary policy is concerned, unemployment not only increases the allowances and further spending, but it also decreases the revenue generated by the income tax. Government can control unemployment by lowering the interest rates as this may allow the aggregate demand to grow despite a global economic slowdown. Fiscal policy is also boosting AD as the budget deficit increases. The United Kingdom is one of the reputable, stable and powerful states. Great Britain Pound (GBP) is also considered one of the stable currencies. Like any other country, the United Kingdom is also not free of problems, obstacles, failures and deficiencies. It is really not possible to meet needs of all the citizens. A responsible state government tends to come up with policies and campaigns to help out its citizens. The government of the United Kingdom has also proven to be one of the sincere governments worldwide. The UK government has been trying to provide opportunities to all the unemployed citizens. However, increase in job centers, training centers, foreign investments and easy business loans can bring quite better results. References Economics Help, 2007. The True Level of Unemployment in the UK. [Online] Available at: HYPERLINK "http://www.economicshelp.org/blog/unemployment/the-true-level-of-unemployment-in-uk/" http://www.economicshelp.org/blog/unemployment/the-true-level-of-unemployment-in-uk/ [Accessed 21 July 2010]. Gillespie, A., 2007. Foundations of Economics. New York, United States: Oxford University Press Inc. Lund, R. & Pedersen, P.J., 1985. Unemployment: theory, policy, and structure. Denmark: Walter de Gruyter & Co. Miller, T., 2001. The Policy Measures Available to the Government to Tackle the Problem. [Online] Available at: HYPERLINK "http://www.economic-truth.co.uk/alevel/curingunemployment.pdf" http://www.economic-truth.co.uk/alevel/curingunemployment.pdf [Accessed 22 July 2010]. Monaghan, A. & Conway, E., 2009. UK wages collapse at fastest rate in 60 years. [Online] Available at: HYPERLINK "http://www.telegraph.co.uk/finance/economics/5245729/UK-wages-collapse-at-fastest-rate-in-60-years.html" http://www.telegraph.co.uk/finance/economics/5245729/UK-wages-collapse-at-fastest-rate-in-60-years.html [Accessed 22 July 2010]. Shaikh, F. & Fincher, C., 2010. Jobless Claims Fall and Wage Pressures Ease. [Online] Available at: HYPERLINK "http://uk.reuters.com/article/idUKTRE66D12V20100714" http://uk.reuters.com/article/idUKTRE66D12V20100714 [Accessed 21 July 2010]. Statistical Bulliton, 2010. Labour Market Statistics. [Online] Available at: HYPERLINK "http://www.statistics.gov.uk/pdfdir/lmsuk0710.pdf" http://www.statistics.gov.uk/pdfdir/lmsuk0710.pdf [Accessed 21 July 2010]. Tutor2u Limited, 2006. Measuring unemployment in the UK. [Online] Available at: HYPERLINK "http://tutor2u.net/economics/revision-notes/a2-macro-unemployment.html" http://tutor2u.net/economics/revision-notes/a2-macro-unemployment.html [Accessed 21 July 2010]. Worswick, G.D.N., 1991. Unemployment: a problem of policy : analysis of British experience and prospects. New York: Cambridge. Read More