Reduction in the unemployment rates in Britain - Essay Example

Unemployment in the United Kingdom Reduction in the unemployment rates in Britain - An introduction Unemployment is obviously the number of people who are not involved in any productive job. This not just includes people who don't have a job because of an economic slump, it also includes people who are below the age of 16 and above the age of 60. In Britain the rate of unemployment is calculated in two ways, one way is through the rate based on the claimant count, which includes all those who are unemployed and actually claiming benefit in the form of Jobseekers Allowance. The other ways International Labor Organization total (preferred by the government), which includes people who are not eligible for benefit. The figure below shows the reduction in unemployment rate over the past decades. Over the past decade, the British economy, has seen sustained economic growth. Today, it is one of the strongest European Union economies in terms of inflation, interest rates and unemployment. The figure above shows the decrease in the unemployment rate in Britain over the past decades as measured by the claimant count measure. The unemployment rate in particular is currently at 5.2%, a rate which is the lowest among the world's leading industrialized countries. The reason why the government was able to reduce the unemployment rate is because of their macro-economic policy. British Macro-economic policy Macro-economic policy, is any policy, that tries to influence the behavior of important macroeconomic variables, especially unemployment and inflation through it implementation. The British macro-economic policy involves the achievement of four main objectives, which include full employment, price stability, sustainable and high rate of economic growth, Balance of Payments, which is at equilibrium. With regards to the objective of reducing unemployment in the macro-economic policy, the labor government had been trying hard to reduce structural or long-term unemployment through its new deal. Here's a look at the factors which have helped in the reduction if unemployment rates in Britain: The implemntation of the objectives of he new deal, has largly been successful in cutting down people who are able to work, but who live in welfare. The British economy is in an up-swing , which means price stability and a reduction in inlfation. All this means more wages and salaries for people, which means more job opportunities and better incomes. The balance of payments is in place, indicating that UK exports anre more than it imports, which means tht people have more chances to get employment or be successful in busiess ventures The above factors show that both the economy and the government policy have been conducive to reducing the unemployment rate. While the economic reasons are important factor, the other important factor is the steps taken by the labor government to reduce unemployment though implementation of the objectives of the new deal. A look at how the new deal contributed to reduced unemployment The new deal is a program brought out by the labor government in the interest of public welfare, in the year 1998. The person credited with devising the new del plan is LSE Professor Richard Layard. The purpose of this program is to reduce unemployment by providing training, subsidized employment, and voluntary work to the unemployed. In the year 2001, the amount spent to achieve the targets of the new deal was 1.3 billion. The new deal has given the government the power to withdraw benefits from those who refused "reasonable employment".. A complementary project to this program was introduced in the year 1999 and it was called the Working Families Tax Credit. This tax credit scheme is aimed at low income workers which and it provides them an incentive to work, and to continue in work. According to Professor Richard Beaudry, from the Department of Economics at the University of York, defined as follows the New Deal in a 2002 paper, Workfare and Welfare: Britain's New Deal (pp.8-9): "The New Deal reforms promise eventual reform of welfare assistance for all benefit recipients." The new deal was basically aimed at uplifting the condition of unemployed youth (19-24 year olds), but this program has expanded to include many different groups such as the following: New Deal for Young People (NDYP) - This plan is much supported by the U.K government, with a greater proportion of New Deal funding (3.15 billion through to 2002) going towards its implementation. The chief target of this plan are the unemployed youth (aged 18-24) who have been unemployed for 6 months or longer. New Deal for the Long-term Unemployed - This plan is targeted at adults (more than 25 years of age) and who have been unemployed for eighteen months or more. This plan was allotted 350 million in the year 2002. New Deal for Lone Parents - This plan is targeted at unemployed single parents who have school going children. It was allotted 200 million and this does not include the amount allotted towards child-care. New Deal for the Disabled - this plan targeted those who are receiving disability benefits and encourages them to return to work. ). New Deal 50 plus - This plan is targeted at those aged 50 year old and above. New Deal for Partners - This plan is targeted at partners of benefits claimants. New Deal for Musicians - This plan is targeted at aspiring unemployed musicians. The task of achieving the objectives of the new deal are to be implemented by Jobcentre Plus, which is a government agency that has been established to support people of a working age to move from welfare into work, and to help employers to fill their vacancies. This government agency was launched in the year 2002 and has been instrumental in bringing together the Employment Service and parts of the Benefits Agency that delivered services to working age people. . Results of implementing the New Deal As a result of the new deal program, the unemployment rate has as of this year come to 5.5%. According to the labor force survey (LFS, this means that 29.00 million people were in work. This is by far the highest figures for unemployment, wherein it has gone up by 216,000 over the last year. The working age employment rate stands at 74.5%, indicating that it is down by 0.2% from last year's rate and is caused by the growing working age population. The growing working age population is because of the availability of more jobs due to the growing economy and the implementation of the new deal. Earnings growth has been by 4.1%. Commenting on the reduced unemployment rate, Jim Murphy, Minister of State for Employment and Welfare Reform, said: "Employment is up, unemployment down and the numbers on each of the main benefits - Jobseeker's Allowance, Incapacity Benefit and lone parent benefits - are falling. Because of our reforms to the welfare state, more people have been looking for work and now more people are taking up jobs. "These figures paint an encouraging picture and show welfare reform in action. The UK already has the highest employment rate in the G8, but we need to go further still. That is why our Welfare Reform Bill is so important. We are determined to reach our long-term aim of 80% employment, and to break for good the cycle of poverty and benefit dependency. To achieve this we need to reduce the numbers on Incapacity Benefit by one million, increase the number of older people in work by a million and the numbers of lone parents in work by 300 thousand." The established of Job Plus government agency has results in many benefits to the people. The results of their efforts is reflected in recent statistics, which show that the number of people on incapacity benefits has reduced by 54,000 in the year to May and is currently below 2.7 million for the first time in six years. The number on lone parent benefits has also reduced by 14,000 on the year to 774,000. These figures have been welcomed by Jim Murphy, Minister of State for Employment and Welfare Reform, whose comments on them is as follows "Employment is up by nearly 200,000 on the year, and with a strong economy and over 600,000 vacancies there is room for more". The above statistics indicate a healthy trend, which will continue to rise because of the following reasons: The labor market is in a strong position - This is obvious because 28.99 million people are employed as of the months from July to September, one of the highest figures on record. The employment rate is 74.5%, down and the overall 16+ employment rate, at 60.1%, is close to its highest since 1975. The inactivity rate is down to 21.0%, which is the lowest since the year 1992. ILO unemployment is 5.6%, which is a level that's not been achieved since the 1970s. The number of vacancies is as high as 600,000, indicating more employment opportunities are available for the working age people. Increase in the number of people in work or looking for work and reduction in economic inactivity - The employment figure have risen by 192,000 in this on the year. There are more people searching for employment as a result ILO unemployment is 1.71 million, which indicates an increase of 27 thousand on the quarter and of 263 thousand on a year ago. The total number of people on out-of-work benefits has been stabilized - This is seen in the fact that the number of people on incapacity and lone parent benefits are reducing while claimant unemployment has risen. The number of people claiming incapacity benefits fell strongly by 54 thousand in the year to May 2006, to 2.69 million; while the number on lone parent benefits fell 14 thousand to 775 thousand. The number of vacancies remains high and redundancies are low and falling - This is seen in survey estimates which show that there are 602.6 thousand unfilled vacancies in the three months to October 2006. There more than 10,000 new vacancies placed at Jobcentres every working day and that almost the same number are reported for vacancies put through other recruitment channels. Redundancies are close to record lows. There were 141 thousand redundancies this quarter, up 3 thousand on three months ago but down 19 thousand on this time last year. All the above facts and figure indicate sustainability in the reduction of unemployment rate in the U.K, not just for now but also in the future time period. This is supported by the implementation of the new deal objectives, which are going to be continued and in the healthy economic trends furhter helps to enhance the aims of the new deal. References Greenaway, D. and Shaw, G.K. (1988) Macroeconomics: Theory and Policy in the UK. Basil Blackwell, Great Britain. Layard, R., Nickell, S. And Jackman, R. (1991) Unemployment: macroeconomic performance and the Labour Market Oxford University Press, Oxford. Stevenson, A., Muscatelli, V. and Gregory, M. (1988) Macroeconomic Theory and Stablisation Policy, Philip Allan, London. Burda and Wypolosz (1997) Macroeconomics: a European Text, 2nd Oxford University Press, Oxford. Dornbusch, R. and Fischer, S. (1990) Macroeconomics, McGraw-Hill International Editions Unemployment, [15, May, 2002] UK Unemployment, [15, Dec, 2006] More older people in work, fewer people on incapacity & lone parent benefits, [15, Nov, 2006], Employment is up by 192,000 on last year, the latest Labour Market figures show, [13, Dec, 2006] http://www.jobcentreplus.gov.uk/JCP/News/SSC120506140117.xml.html Jobcentre Plus Performance Against Targets http://www.jobcentreplus.gov.uk/JCP/Aboutus/Jobcentreplusperformance/index.html Read More