Poverty and Unemployment - Report Example

Running Head: POVERTY AND UNEMPLOYMENT Student’s Name: Course Code: Lecture’s Name: Date of presentation: Abstract Poverty and unemployment are among the principal challenges facing the global economy in recent days. This paper explores the effects of poverty and unemployment globally, policies and laws in place to curb the two national problems globally and more specific to Saudi Arabia and Australia. Introduction Unemployment contributes greatly to financial crisis and eventually lowers the overall purchasing power of a population in a country. This eventually leads to unprecedented poverty as well as increase in burden debt. According to World Bank, poverty refers to a financial condition where a population fails to maintain the minimum acceptable standards of living. Poverty can be classified as rural poverty (mainly in developing Third World countries) or urban poverty (experienced broadly in developed nations). Unemployment refers to a phenomenon where a willing and able bodied is unable to find meaningfully income generating job. Poverty and unemployment are interconnected in that the basic cause of poverty is lack of sufficient income i.e. unemployment. Globally governments are battling these challenges of in light with the UN initiated millennium Development goals. Problem statement Persistent unemployment poses a great challenge for the welfare of a state. First it depletes the funding base of country. Secondly, raises the demand for national welfare plans as a result of inequality and poverty arising from high unemployment rates. This paper explores the effects of poverty and unemployment, policies and laws in place to curb the two national problems globally and more specific to Saudi Arabia and Australia. Governmental Policies and procedures Unemployment remains the main cause for poverty in Australia today. King (1998) reveals that about 70 percent of unemployed Australians having net income below the Henderson Housing Poverty Line have the highest poverty rate. Many Australians have no idea how poverty thrive in a rich country like theirs, something that forms image of developing countries overseas. However, looking beyond the traditional definition of poverty, it is evident that about two million Australians live in income poverty. In 1970s the Government of Australia developed a National Poverty Inquiry aimed at developing a poverty line, develop a budget standard that plan standardized domestic budgets for both middle and low income earners as well a coming up with a broad strategic policy of fostering employment and reducing poverty. The social security system in Australia is a huge fortification against poverty and joblessness. It offers a regular income source apart from offering some meaningful opportunities for the local people to advance their prospects of finding a meaningful and well paying job. This sufficient social payment is the most crucial direct impact by the government on reduction of unemployment and poverty. However, anomalies and bureaucratic gaps within the systems are responsible for the hardship and extended poverty experienced by the few poor people in Australia. It is worth noting that reduction of unemployment level will only lead to poverty reduction by a certain extent. Even full time job creation coupled with strong economic growth, with high standard education and training in improving employment chances of low skilled workers is not alone enough to tackle unemployment and insecure employment. This therefore underscores the significance of creation of a safety net inform of policies, legislations and laws necessary to shore up insecure and low income of the poor. There is however the extent to which such [policies of social security and work incentives can be applied. This is due to adverse effects on cost on government expenditure. In Australia however, the security system focuses on people with the least income and the social welfares optimum payment rates are lower than minimum wages. This is due to the country’s low population and thus making it to record the least social welfare expenditure among the OECD countries. Analysis and finding Saudi Arabia as a country is approaching the efforts of fighting unemployment and poverty by focusing on the economic, social and environment props of sustainable national development. In line with the recommendation of a UNDP social empowerment and governance recommendations, Saudi Arabia has focused on three capacities strategies; individual, institutional and methodical capabilities. The monarch has a made a considerable improvement in the HDI ranking by the UN Country Analysis framework, moving to 0.752 in HDI. In the year 2011, the country the country had should the prospects of attaining ten of the eleven milestones set out in National MDG report by the year 2015. By the same year, the country had managed to lower the percentage of families living below the $2/day benchmark to just over 0.6 percent. Saudi Arabia’s economy is majorly run through oil and petroleum incomes which constitute 90 percent export earnings, 45 percent GDP ratio and 80 percent public earnings. This is in contradiction with the high rate of unemployment at over 14 percent as at 2009. To curb this, the Saudi government has embarked on setting out policies that will make the economy slowly diversify beyond the oil and petroleum products export as well as creating future job opportunities through the fostering of knowledge – based economy. In fostering education, Saudi Arabia has invested heavily in modern generation universities and other tertiary institutions to shore up an effective human resource base. In energy and environment sectors, the Saudi government is assumed a main player in the international energy market through active policy dialogues on issues touching energy and environment sectors as a pivotal member of OPEC, as well as being the only Arab nation in G20. After years of depending on oil, mineral and water resources, policy makers in the kingdom are targeting other means of boosting efficiency of resource utilization of green economy concepts, thus optimizing the use of the scarce resources with the objective of fostering sustainable economic growth, poverty and, tackling local and global environmental challenges. The most probable reason why Saudi Arabia has a relatively high unemployment rate is due to job mismatch between local graduates and local industries and labor markets demand. This is evident from number of expatriates hired in both private and public sectors. Although the country was spared by the spate of Arab Spring unrest, most analysts put unemployment levels to be at 10 percent which is a concern as over 60 percent is the population is aged 30 years and below. The Saudi Kingdoms discovery of oil and the resultant oil and petroleum products revenue in the early 1970 was the epitome of drastic economic changes the Kingdoms economic realism. The rapid transformation over a short period brought certain problems of disparity between the public and private sectors. To curb the rising in equality, the monarch instituted measures aimed at increasing the attractiveness of working in the private sector, creating social insurance, establishing pension plans just like what was available in the public sector, as well as introducing limits on employment in the public sector. Many policy analysts believe that there is a huge discordant between employees in private sector and government sectors I relation to the relevant skills required in filling vacant opportunities in the private sectors. The education system is also wanting, in the sense that it fails to prepare graduates with work values and ethics crucial in the modern job environment. To tackle the above, the Saudi are being encouraged to accept blue collar jobs especially in the booming construction industry with has a potential of absorbing a huge number of graduates churned out annually from the universities and other institutions of higher learning. The government is now focusing in investing and developing a human resource capable of handling the challenges posed by the policy of Saudization. This includes the expanding of the monarch’s economic base through the creation of additional employment opportunities in strategic areas and sectors which the country has a competitive gain. The country is also developed a competitive workforce through radical transformation of its education system and promoting labour skills that give rise to a skilled population with the right and matching economic prowess. In Saudi Arabia the government introduced measures aimed at preparing the youth to take up greater responsibilities through participation in growth and development of the country’s economy. This policy is popularly referred to as Saudization of jobs. This program has been extended not only to all public sectors but also to private sectors where the government is giving incentive to companies so that they can hire Saudis. In line with this, policy makers in Saudi Arabia has realized the significance of boosting human resources development a top priority through establishment of an effective modern mechanism that will guide and usher it. The proposed mechanisms are required to comply with the aspirations of the local national labor market thus guaranteeing the best returns both quantitatively and qualitatively. Efforts to boost human resource development started in 1970s with the launching of a series of five- year plans up to the 2004 when the seven year strategic plan was unveiled. In this latest plan, about 275 Billion Riyals have been set aside to bankroll the human resource development. In the year 2000, the Council of Ministers in Saudi Arabia through resolution No.107, as well as Royal Decree No. 18M, set up Human Resources Development Fund. Despite being a brilliant idea, the fund has been faced with unprecedented challenge. The strategic goal has become challenging to implement in the private sector. Nonetheless, the strategic objective is aimed at bringing economic, social and security benefits to the nation. a) The overall goal of the Human Resource Development Fund is: b) Share the cost of educating, training, and hiring the national workforce in the private sector c) Giving grants to companies and institution involved in educating, training, and hiring the national workforce in both national service and private sector. d) Meeting a pre- agreed percentage of the salary paid up to a trainee of the program in private sector. e) Extending financial assistance to approved programs in the projects, plans, studies and fields that employ Saudis that enable them to assume responsibilities that are hitherto handled by expatriates. f) Offering loans to private company establishments that help in training and preparation of national workforce g) And, currying out studies and research that relate to similar activities for employing and training national workforce Poverty and unemployment levels in Australia are rather politically contentious issues. Many left wingers Australians believe that relative poverty levels are the most appropriate measure of poverty index. This refers to more regard on percentage population rather than comparison of average earnings. Right wingers however, believe that such a measure obscures the fact that there exists a considerable case of absolute poverty that is worth consideration. Unemployment and poverty are function of level of education. The government of Australia has embarked on a campaign aimed at boosting the number of graduates churn out of post secondary education level. Education is also free in some cases as well as accessible to all men and women. The Australian Government has now set and defined the sufficient minimum basic wage above the poverty income figure of an adult. This has enabled a fulltime worker to live in a modest life. The current government also has a strategic plan of designing labor market policies that boost equality especially to the marginalized groups. On the other hand Saudi Arabia, Sharia laws have inhibited access to education for women, thus greatly disadvantaging them in the job market. In addition women are also prohibited from engaging in economic activities that encourage their interaction with men. The Saudi government is however bankrolling a program whereby unemployed people will be offered six months employment by the state at a training salary, with considerable wage subsidies. Conclusion Joblessness and poverty is a big challenge to any economy, society or to the unemployed themselves. Although there is no much scientific evidence to show how unemployment leads to poverty, this is undisputable fact in economic terms. The new welfare systems, policies, laws and legislations in Australia focuses centrally on unemployment and capacity building as a way of tackling poverty and marginalization within Australian communities. References Al-Ali, F.M. 1997. “Nationalizing the Workforce of Saudi Arabia: The Role of Chambers of Commerce and Industry Training Programs in the Private Sector”, thesis, Florida Atlantic University, Boca Raton, Florida The article highlights the strategic reforms initiated by the Saudi Monarch in funding Saudi nationals employed in private companies through the Human Resource Development Fund. This is aimed at equipping the young population with modern skills to run companies in both public and private sector. Al-Ghaith, A. & Maashoog, M. 1996, “Saudi citizen employment in the private sector: Obstacles and solutions”. Riyadh, Saudi Arabia: Institute of Public Administration. This is a public journal document that the author shows the challenges that the Saudi Government faces in extending the HRDF to private companies. The author highlights the facts with numbers of the ratio of employees in public vs. private sector. Fakeeh, M. 2009. Saudization as a Solution for Unemployment: The Case of Jeddah Western Region. PhD thesis. University of Glasgow Feather, N. T. (1997), ‘Economic deprivation and the psychologicalimpact of unemployment’, Australian Psychologist, Vol. 32, 37-45. Sydney, Society of St Vincent de Paul, Campbelltown, NSW Human Resources Development Fund- The guide Book from http://www.hrdf.org.sa/downloads/GuideBookEng.pdf This is a policy brief document that highlights in detail the reasoning behind the Human Resource Development Fund, the guidelines and objective expected to be attained. Poverty in Australia Australian Senate inquiry, entitled “A hand up not a hand out: Renewing the fight against poverty”, from http://www.democrats.org.au/campaigns/poverty_in_australia/ This is a report prepared by the democrats after a 15 month inquiry by the Australian Senate. The report points out the steady decline in income in many Australian poor households. The report recommends that the parliament carry out commission research in efforts poverty- reduction measures Read More