Beruflich Dokumente
Kultur Dokumente
unemployment and economic growth has been broken (The Independent, 2013). Unemployment
is defined as the existence of a section of the labour force able and willing to work but unable to
find gainful employment(Bannock and Baxter, 2011: 391). The ONS uses the International
Labour Organisation (ILO) definition for unemployment. Under ILO guidelines, anybody who is
aged 16 and over without work, available for work and seeking work is unemployed
(Detini.gov.uk, 2014). Youth unemployment in the UK is the level of unemployment among
young people, defined as those aged 1624 (Ons.gov.uk, 2014). The unemployment rate for
people aged 16-24 was 17.7% in November 2013 to January while UK unemployment rate
remained steady at 7.2% (McGuinness, 2014; Ons.gov.uk, 2014). The purpose of this essay is to
assess why youth unemployment was so high in 2013 and the eventual consequences for the
government. After first reviewing the methods of measuring unemployment it examines the
causes of unemployment. Then the reasons for the sharp rise in youth unemployment will be
provided. Finally the consequences of high youth unemployment and the policies adopted by the
government will be evaluated in order to lead to a conclusion.
There are two different methods of measuring unemployment. The traditional measure is the
claimant count. This includes as unemployed, those who are eligible to claim the Job Seeker's
Allowance (JSA) (Pettinger, 2010). The main measure of unemployment in the UK is the
International Labour Organisation count. This is taken from a wider survey of employment
called the Labour Force Survey. To be counted as unemployed, an individual has to be without a
paid job, be available to work within a fortnight and has actively searched for work in the
previous four weeks (Anderton, 2008). Of the two measures, the ILO unemployment is likely to
be above the claimant count hence there are various regulations limiting the availability of the
JSA (Gillespie, 2011).
Unemployment has a variety of causes which fall into two broad categories: equilibrium
unemployment and disequilibrium unemployment. The diagram (a) below illustrates the
equilibrium unemployment. Equilibrium unemployment L1L2is the difference between those
who would like employment at the current wage and those willing and able to take a
job(Sloman, 2006: 401). The DL curve shows the aggregate demand for labour. The job
acceptance curve (JA) shows the aggregate supply curve of labour consisting of those who are
willing and able to accept a job at a given real wage. The labour force curve (LF) shows the
number of people in work or looking for work at each real wage (Stanlake et al., 2000).
According to Gillespie(2011: 428) the level of unemployment at a wage rate of W 1 is known as
natural level of unemployment.
The natural rate of unemployment.
(a)
JA=SL
Real Wage
LF
W1
DL
L1
L2
Quantity of labour
There are three types of equilibrium unemployment. One is structural unemployment. This
occurs when the demand for labour is less than its supply in an individual labour market in the
economy (Anderton, 2008: 194). A key factor is immobility of labour, both geographical and
occupational. A particular reason is the fact that youth workers lack the necessary skills or
qualifications and this exacerbates the lack of aggregate demand for them (Grant et al., 2003).
According to Ons.gov.uk(2014) by the age of 24 the proportion of those who were unemployed
in 2013 was lower for degree holders at 8% compared with 12% for those with GCSEs. As the
Centre for Cities (Pettinger, 2009)has reported there is a correlation between youth
unemployment and poor GCSE results in Mathematics and English.
80
Disequilibrium unemployment
and for those with GCSEs as their highest qualification it was 18% (Ons.gov.uk, 2014). By
analogy with the statistics regarding the age of 24 from above, it can be noted that for those with
the higher qualification, the likelihood of being unemployed has fallen more sharply. A third is
SL
seasonal unemployment. Sloman (2006: 404) associates it with industries or regions where the
demand for labour is lower at certain times of the year. For example, seasonal industries such as
staffing ski resorts and summer camps for extreme sports create a fluctuation in youth
unemployment.
The diagram (b) below illustrates disequilibrium unemployment. The same notations as in the
diagram (a) are used for curves. Sloman (2006: 401) defines disequilibrium unemployment as a
result from real wage rates in the economy being above the equilibrium level.In this case
disequilibrium unemployment is caused by an excess supply of labour of A-B at a wage rate of
W1 (Sloman, 2006). For this to occur, there must be a stickiness in wages, so that the real wage
does not immediately fall to the equilibrium level We (Sloman, 2006).
DL
W1
W2
B
(b)
was the source of arguments with family, and also played a part in driving them to drugs or
alcohol(Princes-trust.org.uk, 2014). The host of issues arising from the problem of youth
unemployment are in turn a burden on the NHS and law enforcement agencies, straining
resources and imposing high costs (Lee et al., 2014).Thirdly, unemployment involves a loss of
potential national output because the economy is productively inefficient. In other words, the
governments budget position worsens due to loss of income from taxation and higher spending
on benefits (Gillespie, 2011). Lastly, Inman (2011) has claimed that Britain's worsening
economic situation is in danger of creating a lost generation of youngsters. To clarify, hysteresis
effect may occur, leading to long-term unemployment (Tutor2u.net, 2011).
To summarize, there is a crisis in youth employment in the UK. Transitions into good work have
been getting harder for young people across a broad range of skills and qualifications levels.
Transitions for young people into the labour market have become longer and more insecure.
While the introduction of the Youth Contract is a positive step, government policy for long-term
youth unemployment remains inadequate to the scale of the challenge. A conclusion can be
drawn that since the crisis of 2008, it is clear that the worst effects of changes in the labour
market have been felt by young people. Youth unemployment in the UK has jumped dramatically
and is remaining stubbornly high. As has been evaluated throughout the essay for 16-18 years old
unemployment is mostly structural and frictional while for those with the age between 18-24
demand-deficiency unemployment is the prime cause.
References
Anderton, A. G. 2008. Economics. 5th ed. Harlow: Pearson Education.
Bannock, G. and Baxter, R. E. 2011. The Penguin dictionary of economics. London: Penguin.
Detini.gov.uk. 2014. Department of Enterprise, Trade and Investment (DETI). [online] Available
at: http://www.detini.gov.uk/unemployment_measures.pdf? [Accessed: 13 Apr 2014].
Gillespie, A. 2011. Foundations of economics. 2nd ed. Oxford: Oxford University Press.
Gov.uk. 2014. National Minimum Wage rates - GOV.UK. [online] Available at:
https://www.gov.uk/national-minimum-wage-rates [Accessed: 12 Apr 2014].
Grant, S., Vidler, C. and Ellams, A. 2003. Heinemann economics A2 for Edexcel. Oxford:
Heinemann Educational.
Inman, P. 2011. Fears of 'lost generation' as youth unemployment hits record. [online] Available
at: http://www.theguardian.com/business/2011/jan/19/youth-unemployment-at-record-high
[Accessed: 13 Apr 2014].
Lee, N., Sissons, P., Balaram, B. and Cominetti, N. 2014. Short-term crisis - long-term problem?.
[online] Available at: http://www.theworkfoundation.com/Reports/314/Shortterm-crisislongterm-problem-Addressing-the-youth-employment-challenge [Accessed: 13 Apr 2014].
McGuinness, F. 2014. Youth unemployment statistics - Commons Library Standard Note. [online]
Available at: http://www.parliament.uk/business/publications/research/briefingpapers/SN05871/youth-unemployment-statistics [Accessed: 12 Apr 2014].
Ons.gov.uk. 2014. Young People in the Labour Market, 2014 - ONS. [online] Available at:
http://www.ons.gov.uk/ons/rel/lmac/young-people-in-the-labour-market/2014/rpt-youngpeople.html [Accessed: 12 Apr 2014].
Pettinger, T. 2010. Definition of Unemployment | Economics Help. [online] Available at:
http://www.economicshelp.org/blog/2247/unemployment/definition-of-unemployment/
[Accessed: 9 Apr 2014].
Pettinger, T. 2009. Reasons for Youth Unemployment | Economics Help. [online] Available at:
http://www.economicshelp.org/blog/517/economics/reasons-for-youth-unemployment/
[Accessed: 12 Apr 2014].
Princes-trust.org.uk. 2014. The Princes Trust YouGov Youth Index 2010. [online] Available at:
http://www.princes-trust.org.uk/pdf/Youth_Index_2010.pdf [Accessed: 13 Apr 2014].
Sloman, J. 2006. Economics. 6th ed. Harlow: Pearson Education Limited.
Stanlake, G. F., Grant, S. and Stanlake, G. F. 2000. Stanlake's introductory economics. 7th ed.
Harlow: Longman.
The Independent. 2013. Nearly a million under-25s still unemployed despite growth. [online]
Available at: http://www.independent.co.uk/news/uk/politics/nearly-a-million-under25sstill-unemployed-despite-growth-8935723.html [Accessed: 8 Apr 2014].
The Independent. 2013. Flagship 1bn youth unemployment scheme branded a failure. [online]
Available at: http://www.independent.co.uk/news/uk/politics/flagship-1bn-youthunemployment-scheme-branded-a-failure-8897501.html [Accessed: 13 Apr 2014].
Tutor2u.net. 2011. Revision: Consequences of Unemployment. [online] Available at:
http://www.tutor2u.net/blog/index.php/economics/comments/revision-consequences-ofunemployment [Accessed: 13 Apr 2014].