What Has Been the Development of Unemployment Rate in the European Countries Recently - Case Study Example

Running Head: UNEMPLOYMENT IN UK AND GERMANY What has been the development of unemployment rate in the European countries recently? of the Writer] [Name of the Institution] [Date] What has been the development of unemployment rate in the European countries recently? Introduction Unemployment in global scenario is a thought provoking issue and a continuous rise in unemployment worldwide can be noticed. The case of United Kingdom and Germany indicate towards the requirements to solve the problem of unemployment. The unemployment rate of UK is quite high and Germany is also facing the issue of unemployment, however, the adopted policies by Germany’s administration are quite supportive for its people and in altogether controlling the issue of unemployment. The aim of this research is to research about how unemployment rate developed in the United Kingdom and Germany, which factors contributed to those developments. The research objectives of this paper are to compare the unemployment rate between United Kingdom and Germany, to analyse the unemployment rate evolution from 2003 to 2013 in United Kingdom and Germany and to identify the factors associated with unemployment rates of United Kingdom and Germany. This paper answers the research questions that are: ‘What has been the unemployment rate in United Kingdom and Germany throughout last ten years?’ and ‘Why have Germany registered lower unemployment rate than United Kingdom?’  Unemployment in UK and Germany In the United Kingdom, the ratio of unemployment is elevated for youth. United Kingdom cannot be categorized as the most terrible player among other nations, but as compared to European Union (EU) and Organization for Economic Cooperation and Development (OECD), the rate of unemployment in UK is elevated. As far as Germany is concerned, the country is also facing the challenging issue of unemployment, but the administration has taken enough measures for controlling it largely. In Germany, the advent of recession has not affected the youngsters in its severity as it has affected UK. Therefore, the case of Germany can be taken an example for UK in order to bring improvements in its policy (Crowley, et. al 2013, p. 10). The issue of youth unemployment in UK has become an ever-rising issue because of its augmented rate in UK as compared to other states. The ratio of unemployed youngsters ranging between 15 and 24 years of age has increased maximally during recession as compared to EU and OECD in average. The years 2007 until 2011 saw an increase in unemployment from nine percent to twelve percent in UK. However, in Germany, the percentage of unemployment instead of increasing decreased by two percent (Crowley, et. al 2013, p. 10). If we notice the period between 2003 and 2013, it can be seen that in UK, people remained unemployed for long durations due to which, the youngsters suffered effects on ‘wages, employment and health’. However, improvements can be seen in UK’s labour market in current months as the unemployment ratio for youngsters has become constant. The issue of increasing unemployment cannot be associated to recession alone. However, recession has contributed a lot to the increase of unemployment even then, UK is undergoing a continued increase in young unemployment since 2004. The number of long-term young unemployed people in UK has quadrupled in the last decade (Bell & Blanchflower 2010, p. 4). The economic recession hit UK extensively as the numbers of employed people who get unemployed were five hundred and eight thousand between 2008 and 2010. This decline was in total less as compared to the decline in employment people in the recession of 1980s. During 1980s, the numbers of employed people who become unemployed were nearly 1.6 million from 1980 to 1983. The male workers lose their employment more as compared to women as during 2008 and 2010, a ratio of three percent fall in employment had been noticed for men while that for women the ratio was 0.7 percent only. Overall, the people who got unemployed were eighty-four percent men and the remaining were women showing a major difference between men and women in terms of losing jobs. The recession of 1980s and 1990s also made male employment downfall to seventy-eight percent (Bell & Blanchflower 2010, p. 4). The youngsters lost their employments without any reasons during the recession. Youngsters form only 19.5 percent of the workers in UK, as there are only a few that come under the category of working age. Out of the total that got unemployed, as youngsters, were nearly seventy-four percent of the total young workers in UK. These young unemployed people aged between sixteen and twenty-four. Some gender-based discrimination was also found in the unemployment of people in UK. Overall, forty-four percent male workers lost their jobs while thirty percent females lost their work. If the ratio of people reaching the pension age is to be calculated in terms of male and female reemployment, there was a noticeable increase by one hundred and seventy-three thousand people (Bell & Blanchflower 2010, p. 4). The ratio of unemployed people in UK is calculated by dividing the total of unemployed people beyond the age of sixteen years by the total of all employed as well as unemployed people beyond the age of sixteen years. The term given to employed or working members of the society is labour force or they are also termed as economically active people (Dorling 2012). The rate of unemployment people in UK is rising every year since 1971. This rise shows that the government is unable to cope up with the issues of unemployment till now (Groom 2014). Groom (2014) informs that the recorded history that was initiated in 1971 shows that the working women now in UK are nearly fourteen million showing the highest ratio historically. The calculated ratio of the labour force in UK that are unemployed now is 7.2 percent and has just increased 0.1 in 10 months showing a stable increase in that is appreciated by the economists in UK (Groom 2014). The people who got employed in 2013 are nearly 71.8 percent and their ages range between sixteen and sixty-four. A total of 29.95 million people over the age of sixteen years were part of the UK’s workforce and this ratio is continuously increasing (Office for National Statistics 2013). “The unemployment rate was 7.6 percent of the economically active population.......There were 2.47 million unemployed people aged 16 and over, down 48,000 from April to June 2013 and from a year earlier” (Office for National Statistics 2013, p. 1). Before 2008, the rate of unemployment that was acknowledged officially was about five percent only, but after economic recession, the official rate of unemployed people reached eight percent till 2010 (Authers 2012). After reaching a ratio of 8.3 percent of official rate of unemployment, a reduction was noticed in the increasing rate till 2011. The interest rates are also linked with unemployment as the administration connects the two by saying that fall in unemployment ratio will enable increased interest rates (Authers 2012). Therefore, in total, UK suffered through a bad unemployment crisis that affected its masses extensively. However, currently, there are some chances of improvement, but UK has to correct and implement policies more suitable to its economic market. The unemployment rate in Germany in the year 2011 was just 8.5 percent of the currently working force in total that was reduced as compared to EU and UK. EU’s unemployment ratio was nearly 22.8 percent while that of UK was twenty percent. Germany performed better the two. It cannot be said that there was no unemployment issue in Germany as there was. However, in actuality, German administration fought well with the crisis. The unemployed people between the ages fifteen and twenty-four in the year 2011 were nearly 4.5 percent that was noticeably reduced than UK’s unemployment ratio of 12.5 percent. However, the unemployment ratio of youth is somewhat elevated as compared to adult unemployment ratio (Crowley, et. al 2013, pp. 16-17). The economic boom in Germany did not pressurized Germany organizations to appoint more employees that is indicated by the steady unemployment rate of nine percent even during the economic boom. This unemployment strategy of Germany was not a result of forward looking for future world economic crisis, but German thinking of reinvesting the profits of organizations to maintain their competitiveness globally. The German workers are promised long-term employment security for skilled employees, but with sluggishly increasing compensations. The salaries of working people remain unchanged even in development cycles (Bauer 2013, pp. 12-13). Germany is not like UK in implementing its wage system. The wages that are offered to employees are minimum and are kept after enough negotiations with the industry and social partners. However, government do not participate in this process. The work in Germany is low paid and less skilled workers are offered only an average of seven to ten Euro. However, the compensation of workers gets improved with better acquisition of skills. The skilled workers work under contracts that are open-ended and they are offered with good prospects. The workers working under dual apprenticeship are also offered good wages on contractual basis (Cahuc, et. al 2013, p. 13). Germany works with a Vocational Education and Training (VET) system that adds to its success in fighting the issue of unemployment. The features of the Vet system are “its large scale and high quality training, a high level of integration between the education system and the labour market, high levels of corporate involvement, recognised qualifications, and sustained investment in research and development” (Crowley, et. al 2013, p. 19). UK can adopt the strategies implemented by Germany as per its VET system to deal with the continuous issue of unemployment. In terms of apprenticeships, the German system is categorized as better equipped. German government regards vocational training as significant and assistive for young generation while UK’s government gives it a less important role. The number of apprentices in Germany are four times more than in UK (Crowley, et. al 2013, p. 19). The employers as well as members of the VET consider it privileged. Resultantly, German people regard it as an occupational competence. Comparatively, in UK, mostly offered apprentices are satirized as ‘low quality apprenticeships’. The offered apprentices in UK are mostly of poor quality (Crowley, et. al 2013, p. 19; Bosch 2011, p. 262-263). The German administration makes sure that the educational system in the state offers the students with elevated level of integration between education that is given and the labour market. When people are getting education, they are equipped with the skills required for the labour market. Dual apprenticeship is offered that enhances the qualified level of learners. The students are given schooling facilities as well as work based learning for practical implementation in the workplace. In addition, students are not just specified with some particular job training, but multiple trainings for better settlement in any job or switching between jobs. The apprentices offered in UK are job specific extensively due to which, they are considered not ‘rich’. German apprentices appreciate off the job training while UK apprentices give no time for off the job training mostly (Crowley, et. al 2013, p. 20). As per the dual apprenticeship system, the employers and other social partners such as trade unions and other corporatists at national, regional or organizational levels interact with one another on elevated basis. The planning of training programmes, availability of apprentices with training, establishment of diverse concepts regarding schooling and enterprise and close collaboration between work and education, everything is decided because of engagement of social partners with the employers (Crowley, et. al 2013, p. 20). The German system is benefitted because the large employers as well as small employers, all are busy in designing strategies for VET system and offer opportunities of apprentices to seekers. All the large employers work collaboratively to give some time to ‘curriculum development, course design and are better able to offer training’ due to which, they are already aware about the skills that the new learners would come up with. The in order to offer apprentices, the government of UK should make sure the involvement of large employers in agreeing to some contract that can be beneficial for the learners as well as the employers. The government of UK should offer off the job trainings and there should be a balance between education and given trainings for future placement of learners in the workplace market (Crowley, et. al 2013, p. 23). Germany keeps its labour force competitive due to which, the unemployment in Germany is controlled to an extent. However, the crisis of unemployment is still found there, but it is comparatively low than other countries. The offered wages, price rise and consistent elevated labour efficiency development are significant for job safety for longer periods and all this set up is benefitted from in Germany currently. According to EU, Germany stands on a unique placement as compared to other countries as “that it actually needs more skilled labour than its domestic market offers to maximize its output potential” (Bauer 2013, p. 16). Germany has to continue its current strategy of reinvesting its profits domestically for remaining competitive globally even in the boon cycles. This strategy will ensure Germany’s success in the long run. In addition, it has to ensure that its enterprise sector should remain in close collaboration with the government in order to give boost to its economy. In place of short term profit making, the German companies ensure long term profit making with long term job securities for their workers due to which, they ensure their safety against economic downturns (Bauer 2013, p. 16). Factors Associated with Unemployment Rates of United Kingdom and Germany There are multiple factors associated with varied unemployment rates in different countries that are “the education system, labour market institutions and the benefits system and the strength of the national economy” (Crowley, et. al 2013, p. 16). Unemployment is explained as a consequence of “fairly extensive econometric testing”, however, the currently situations that result in the increase in unemployment are somewhat changed than this orthodox description of unemployment. It is not an easy job to differentiate between the economies of different countries based on their unemployment rate that is extended on yearly tenures. The labour market of different countries is also different and to find similarities in different countries’ labour market is quite complicated (Bell & Blanchflower 2010, p. 8). The labour market institutions are not responsible for creating unemployment and this factor is similar in all the countries’ labour markets. However, “changes in the replacement rate, which, in some specifications, do appear to be negatively correlated with changes in the unemployment rate” (Bell & Blanchflower 2010, p. 8). The part of economic shocks and institutional strategies also affect unemployment, as there is a linkage between shocks and organizations (Bell & Blanchflower 2010, p. 8). The elevated ratio of unemployment in UK is not a result of inadequate labour market suppleness. The downturn in employment is neither because of increased frictions in the labour market nor because of market’s lack of accommodation to workers. However, it is because of downfall in the demand for work related to downfall in the demand of product. Consequentially, the falling product demand plus labour demand results in reflection of credit measuring, downfall of customer’s confidence “responses to transitory shocks in raw materials prices and delayed response by monetary authorities to these developments” (Bell & Blanchflower 2010, p. 8). The mentioned issues result in increased unemployment, but they do not straightforwardly intrude the labour market or affect institutional arrangements in order to influence the efficiency of the labour market (Bell & Blanchflower 2010, p. 8). The unemployment of youngsters in UK has many reasons such as “changing focus of back to work support, a difficult transition from education to work, changes in the occupational landscape and a focus on accredited qualifications” (Crowley, et. al 2013, pp. 9-10). Active Labour Market Policies (ALMPs) switched their attention from young population to inactive members such as “lone parents and incapacity claimants” in the mid of year 2000. This changing attentiveness resulted in increasing young unemployment, as people were unable to get benefits of their abilities and work. The linkage between education and employment are indistinct and complicated in order to comprehend. The young people face difficulties in reaching the labour market because of “shift to an economy based on service work, and growing competition for low wage service employment” (Crowley, et. al 2013, pp. 9-10). The current market requirements need the inclusion of the development of highly skilled professions along with development in consumer relationship services, which is indicative of the fact that the market requires people with ‘soft skills’. ‘Soft skills’ are demanded by employers extensively due to which, their acquisition has become necessary for youngsters. The youngsters who were disadvantaged in terms of not acquiring the ‘soft skills’ were not made part of the labour market resulting in giving a shortcoming to the labour market as a whole. On governmental level, the educational tenure for students and learners have been increased requiring the students to stay longer for obtainment of higher qualifications. This criteria indicates that the employers now require an elevated minimum qualification level, which is a side effect for youngsters who intend to leave education because of any of their considered reason (Crowley, et. al 2013, pp. 9-10). Conclusion The case of unemployment in UK and Germany is quite contrasting. Although both the countries suffer through the crisis of unemployment, however, the status of Germany is much improved as compared to UK. Germany has implemented such strategies and policies that are beneficial for the employees and the country as a whole in the long run. However, the policies and strategies currently implemented by UK are not beneficial and require to be changed. Both the countries underwent economic recession. However, Germany’s policies regarding keeping the wages constant or having sluggish increases with long-term job security because of reinvestment of organizational profits, vocational education and training system and collaborative efforts of enterprise sector and educational sector, all have resulted in better performance by Germany. UK is left behind because of providing inadequate apprentices and training programs, hiring additional workers during economic booms and inconstant wages. Bibliography Authers, J. 2012. Europes Financial Crisis: A Short Guide to How the Euro Fell Into Crisis and the Consequences for the World. FT Press. Bauer, G. (2013). Unemployment in Germany. Available at: http://graphitepublications.com/wp-content/uploads/2013/04/Unemployment-in-Germany.pdf [Accessed 28 April 2014]. Bell, David F. N. & Blanchflower, David G. 2010. UK Unemployment in the Great Recession. [Online]. Available at: http://www.dartmouth.edu/~blnchflr/papers/Bell-Blanchflower.pdf [Accessed 28 April 2014]. Bosch, G. (2011). “The German labour market after the financial crisis: Miracle or just a good policy mix?” Work Inequalities in the Crisis: Evidence from Europe. Vaughan-Whitehead, D., & Elgar, E. (eds.). Cahuc, P., Carcillo, S., Rinne, U. & Zimmermann, K. F. 2013. 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