This paper investigates the cause of unemployment in the economy. Then it highlights the adverse impact rising unemployment levels have on the society as whole. We will later device suitable policy recommendation for the governments, so that they can rectify this economic evil and ensure a smooth running progressive economy. The implications of the policy are also evaluated giving the reader a justification for the suggestion of that particular policy.
Unemployment has been a matter of apprehension for political economy since its commencement. Numerous nations whether progressive industrial economies or developing countries, have had very high rates of unemployment later to the Great Financial Recession of December 2007. ‘The American economy experiences unemployment rate of 9.2 percent in June 2011, and Egypt has a rate of unemployment of 19 percent. The Saudi economy faces a rate of unemployment of 10 percent ’ (Mouhammed). These figures depict a very high unemployment rate for the society as compared to their historical redundancy rates. This economic caveat is extremely costly economically as well as administratively. Economically, redundancy poses a threat to various crucial economic variable, top of the list being a reduction in the Gross Domestic Product (GDP). At the government level, the world observed the Arab rebellion in Egypt, Tunisia, Syria, Libya, Iraq, and Bahrain, to state a few, a rebellion that is instigated by redundancy, destitution, inequality, and tyranny.
Economic theory postulates numerous elucidations for the redundancy problem. Some reasons refers that the fault lies within the economic systems, while others accuse the jobless people. Furthermore, additional philosophies explain that how external sources and jolts, or erratic occurrences results in the occurrence of unemployed in an economy. While a few state that the major reason for the prevalence of unemployment are technology and labor market establishments along with the fact that there has been a shortage in aggregate spending and modernisms.
This paper proposes to evaluate critically these central causes and what are the plausible government policies is overcoming these causes without harming the economy and keeping the social cost of the implication of the policy.
It’s of imperative importance to critically analyze the impact of unemployment on the society as whole. This will depict a clearer picture as what evils this economic threat poses to the society, and the importance for the government to intervene and rectify it. Redundancy always strikes individuals the harshest. The unemployed elude their self-worth, determination, sense of accomplishment and, most important of them all, their source of income. It is not only the persons themselves that are affected; their relatives also grieve with them. All their personal assets like houses and cars are at a constant threat of being reclaimed. Its also creates a distress environment at home, possibly even superfluous loans makes the situation worse even if they find another job they still have to carry a burden of extreme liabilities. To amalgamate the difficulties, the lengthier an unemployed period lasts the tougher it becomes to find a work. The long term jobless can certainly endure, as companies are reluctant to take a risk on somebody that no one else was eager to employ. There is also a significant effect on society and the entire economy. The principal effect joblessness has on society and the economy is the creative power that it suppresses. To signify this further, any individual who is jobless could be constructive if he had been employed and hence adding to the entire economic development. Joblessness also has a straight cost to the government in the shape of any redundancy assistances compensated to the jobless and in adrift tax earnings. ‘This is a double whammy (extra cost and lost income) that can have grave penalties on the rest of the economy as the government is required to fund unemployment benefits either from amplified taxes or borrowing’ (Jones). The amplified taxes subdue consumption, which in turn may result in enlarged redundancy, the scenarios where individuals have a decrease amount of expenditure, fewer incomes for businesses, businesses enforced to lay individuals off. Higher borrowing by the government can have alike consequences as the government takes more cash than usually out of the financial markets. This leads to an aloft force on interest rates that upshots in greater cost for businesses, fewer profits and even additional dismissals.
Another important consequence that unemployment has on the society, is the adverse affect on the human health. In the wellbeing and social science works, though, the connection of joblessness (and other characteristics of monetary privation) with hostile health effects has been examined for several years. ‘ In 1897 European historian Emile Durkheim detected that suicides appeared to happen more frequently in economic variations that distressed the "social fabric" of society. Since the early 1970s, numerous reports of the seeming relation amongst indices of economic downturn and overall mortality rates in Western countries have been issued, one of the best-known authors being M. Harvey Brenner of Johns Hopkins University’ (Jin, Shah, & Svoboda). 'The precise reasons of death most frequently reviewed were cardiovascular diseases and suicide. Curiosity in results concerning cardiovascular diseases, specially heart disease, rose as a outcome of the research that was focused primarily on the question that joblessness produces anxiety and can consequently be a threat factor for heart disease. ‘Brenner stated positive relations amongst redundancy and fatality due to heart disease from time-series data on the populations of the United States, Canada, Australia, Denmark, Finland, France. Two recent time-series examination establish solid aggregate-level associations between joblessness and suicide amongst young adults, particularly men. Morrell and collaborators found the same pattern over an 83-year period from 1907 to 1990 in Australia’ (Jin, Shah, & Svoboda).
Many of the significant authors on the connection between joblessness and growth had little knowledge of their own in unindustrialized nations and could draw on minute previous research about the differences amongst rich and poor countries in source capabilities, relative prices, tools, and economic and political establishments. Development economists recognized that the role of demand deficiency in the explanation of unemployment differs amongst developing and developed nations timely. The consequences of this modification for social costs, nevertheless, were not constantly completely valued. ‘Where unemployment is due to labor market segmentation, it represents a misallocation of labor. The resource costs of unemployment-the output forgone as a concern of having no jobs for individuals willing and able to work-thus depends on the marginal product of labor in the segments where the jobless would work in the absence of division. Since in division models the presumption is that balancing factors are fully employed, the cost of a given amount of joblessness will be less than in a state where Keynesian shortage of demand exists’ (Berry, A., & Sabot, R. H.). The loss of output linked with joblessness has an visible side in loss of income; the being of joblessness also leads to doubt, irregular income torrents, and the mental costs of evading the straight usefulness resulting from work. Even in the developed nations, where the reserve costs of joblessness are obviously great, the corrective strategies, predominantly those which emphasis unswervingly on the labors deprived of jobs are regularly defensible by orientation to the delivery of welfare costs.
Economic Policy Solution and It’s Implications
The examination of these factors of joblessness delivers an outstanding picture for the inclination of public policies. Governments at all levels should deliver precise material about the occupation market in order for employees to be able to grab this chance for discovering occupation. Governments should devote for tutoring in order to mature very fruitful workforces and inventive businesspersons. Training centers are also tremendously valuable for coaching and reskilling the jobless personnel. This prepares employees to mature new proficiencies. Furthermore, administrations can straightforwardly hire personnel, and the Federal government can offer monetary aid to state governments to attain this job. State governments can magnetize foreign direct investments that will be adept to generate numerous occupational opportunities for the workers. It is also advisable for the policy makers to reduce taxes on nationally investing companies, since this act will offer enhance profitability for these companies. ‘Moreover, the Federal government must implement a tax holiday according to which the payroll taxes (taxes for social security) must be cut for a certain period of time, an action that reduces the cost of hiring new workers and provides extra income for the workers, which can be spent on consumption and investment (such as the purchase of a house). The Federal government needs to transfer a noteworthy part of its expenditure from the military to the civilian economy, because the military sector is extremely capital-intensive, demanding a lower level of employment’ (Mouhammed,). This rearrangement is able to decrease doubt and foreign stiffness, which have amplified prices of imported resources such as oil. ‘Tax cuts and less costly rules will upsurge employment and profits and reduce insecurity which will increase national real investments. Spending for Research and Development and the infrastructure are critically important tools for better modernizations (such as finding new methods of production, new products, and new markets for increasing sales) and productivity which will upsurge domestic real investments and economic growth’ (Mouhammed,). The national authorities have to employ certain protocols rendering to which big companies can become extra competitive.’ That is, the decrease of monopolistic and oligopolistic corporate power. This is because these big companies, given they retain less number of labors than competitive firms, cut production and employment rather than prices of products when there is a decrease in demand for their commodities’ (Mouhammed,). This conduct deteriorates the joblessness problem during a slump. If these companies convert into more competitive ones, then the weakening in need for commodities will decrease prices rather than production and occupation. After the emergence of these companies as being more competitive, they will be able to engage more workforces. The concern authorities can also offer more loans at lesser interest rates to corporate individuals and overseas buyers to consume local products. This will raise occupation in numerous national industrial companies. To further complement this, the government can boost other foreign government to decrease or eradicate tariffs in order to make monetary support. The authorities need to cultivate new commodities and new expertise. ‘Both will instill growth national investments and occupation. In supplement, modern commodities and technology can raise the export of the country and will improve the global competitive position of the country. Technology is also a very significant aspect for cumulative productivity which will decrease the cost per unit of output and will intensify the profit margin’ (Mouhammed,).
It’s of extreme importance for every local government all around the world to work hard in drafting appropriate policies that will rectify the upsurge unemployment problem. Examining the impacts of the unemployment in the society, it’s of high priority for the concerned authorities to address this issue.
Berry, A., & Sabot, R. H. (1984). Unemployment and economic development. Economic Development and Cultural Change, 99-116.
Jin, R. L., Shah, C. P., & Svoboda, T. J. (1995). The impact of unemployment on health: a review of the evidence. CMAJ: Canadian Medical Association journal, 153(5), 529.
Jones, J. (n.d.). The Impact of Unemployment on our Society. Retrieved December 14, 2014, from http://www.worldissues360.com/index.php/the-impact-of-unemployment-on-our-society-3-78958/
Mouhammed, A. (n.d.). Important Theories of Unemployment and Public Policies. Retrieved December 13, 2014, from http://www.na-businesspress.com/JABE/MouhammedAH_Web12_5_.pdf