Causes Unemployment In The Uk Essay

Unemployment means being out of a job and being out of work for many reason, which could include various reasons such as educational factors, willingness to work, inflation, recession and many other reasons associated with a person or the employer. It is made up of those who want work and excludes those who are retired, disabled and those who can work but are not seeking a position or job. Tong says (2012) “government collects labor statistics for the purpose of understanding the extent and nature of employment and unemployment in the nation. (Tong, 2012)

Unemployment affects a person’s earning and their standards of living as well as their livelihood. Unemployment is a great problem as well as a concern all over the world. It affects thousands of people in the UK as they are out of a job. Mark Hoban (2011) told the BBC ‘The Government’s economic policies – spending cuts and tax rises that go too far too fast – have choked off growth and led to record levels of unemployment, with youth unemployment soaring. ‘ (Curtis, 2011). This allows to understand that the cause of unemployment in the UK is due to the government through policies and due to intervention in the economy.

Also this statement is said by the financial secretary to the treasury making it a reliable statement allowing us to understand that the government has a very big role in unemployment. ‘Unemployment rate of 6. 2%, (July 2014) – the lowest since late 2008”. (Pettinger, 2014) This shows us that unemployment is still a huge problem in the UK and is caused by different types of unemployment which may apply to people in different ways. I aim to highlight the types of unemployment first and link this to the factors of unemployment with examples and then ultimately analyse the causes of unemployment in the UK with a conclusion.

Types of unemployment Economists distinguish between different types of unemployment such as cyclical unemployment, structural unemployment, frictional unemployment and classical unemployment. Also there is voluntary unemployment which is to do with an individual’s decisions and there is also involuntary unemployment which is due to socio economic environment (market structure, government intervention, and the level of aggregate demand. 1. Cyclical unemployment Cyclical unemployment is also known as demand deficient unemployment, this occurs when there is not enough aggregate demand in the economy to provide jobs for everyone.

There is more demand for jobs compared to the amount of jobs being supplied due to a fall in demand in production of a good consequently requiring less workers. There is a frequent shift in the business cycle. This type of unemployment increases the number of people unemployed in times of economic downturn, for example in the UK at the time of the credit crunch or recession. ONS says that ‘unemployment levels of 3 million were reached in the UK in the last two recessions, between 1980 and 1982, and between 1990 and 1992.

In the most recent recession of 2008-2010, unemployment levels rose to 2. m in the last quarter of 2009, and are likely to peak at over 2. 5m during 2010’. (Economics online, 2014) This allows us to understand that in the UK economic downturns are one of the biggest causes of unemployment therefore allowing governments to intervene to correct this recession and cyclical unemployment caused by it. In the UK currently, government schemes are being provided to provide skills sets to the youth and the people seeking work. BBC news says that (2011) ‘The government says it has launched initiatives to help 350,000 young people into work. (news, 2011)

This may be Apprenticeships as they are being funded by the government as well as funding to those who want to go into further education. This allows people to become employed and tackles cyclical unemployment and also allows the economy to slowly become productive and stable. 2. Structural unemployment Structural unemployment occurs when jobs cannot be provided by an economy due to the skills of an unemployed person not matching the skills required for the job. This type of unemployment lasts longest.

However it can be argued that this type of unemployment occurs due the changes in the free market allowing companies to transfer to countries abroad. Industries changing and moving causes this type of unemployment, in the UK the cotton industries and other trade goods industries moved abroad this meant workers who were required for that job became unemployed and didn’t have skills to go into a new job this is called occupational mobility. C. W (2014) says ‘Structural unemployment in advanced economies has been rising for decades, as jobs in industries like mining and manufacturing have withered’. C. W, 2014)

This allows us to understand that the growing technological processes causes unemployment as it pushes out industries which are not required or causes the workforce to be reduced due to cheaper alternatives such as labour saving machines. E. g. cotton industries being pushed out of Oldham and now produced abroad as it is cheaper. The production of machines which work faster and more efficiently leads to less workers, however it can also create jobs such as system designers and technicians.

This type of unemployment can be aided by government intervention as governments would place policies allowing labour saving machines to be implemented as it would increase production and generate more money for the government through tax etc. and for their benefit therefore increasing this type of unemployment 3. Frictional unemployment Frictional unemployment is when someone is searching for or moving between jobs. This type of unemployment can be voluntary based on the circumstances of the person who is unemployed. This type of unemployment is always present in an economy.

Causes of this type of unemployment may be mobility of labour or expansion of the labour force. 777777 Competition in business through government incentives plays a role in unemployment in the UK. Businesses cut costs in order to increases and maximise profits therefore businesses terminate parts of its workforce and employs a cheaper or alternative workforce for example from overseas for a lower wage rate. Governments investing in businesses to increase economic growth from the profits and tax revenue means less workers in the UK being employed.

This is a form of cyclical unemployment as well as frictional unemployment as workers will be looking for a new job or will be long term unemployed due to a mismatch of skills acquired compared to the skills required in another job. Government intervention allows this type of unemployment due to allowing companies to move and relocate and not enforcing stricter policies, governments and political parties would allow this to maximise profits and to benefit their interests. 4. Classical unemployment This is choices and results from legislative and economic choices made by labour unions or political parties.

This can also be identified as real wage unemployment and occurs when the real wages for a job is set above the market equilibrium/clearing level causing people seeking jobs to increase and exceeds the amount of jobs available. Some economists argue that the more the government intervenes in the market or economy the more unemployment rises. For example the minimum wage increases the willingness of workers to apply for jobs and work as the price is set above the market equilibrium but are unable to as the rate is higher than their value as workers becoming unemployed.

Other causes of unemployment in the UK results from government intervention as they provide assistance and welfare benefits through financial help. The benefits and financial help people receive makes work less desirable and therefore causes long term unemployment. This can be identified as classical unemployment as the minimum wage is too little in comparison to benefits and therefore people opt not to work and find work undesirable. An example of this would be those seeking jobseekers allowance or universal credit because they can’t find a job or are unwilling to look for a job.

This type of unemployment would be most prevalent in the UK as economic choices affect the employed as well as the unemployed, classical unemployment is very easy to find in the UK as protests and many issues regarding wages as well as government legislations etc. are affecting the economy and people. Conclusion Unemployment is a great problem and can hinder an economies or even the UKs development and growth. The government is one of the main contributors to the cause of unemployment in the UK as the implementation of legislations and laws creates voluntary and involuntary unemployment.

Also an individual’s perception and willingness to work can cause unemployment. The causes of unemployment can be frictional, cyclical, structural or classical and these can all be created by the government due to self-interest. The government imposing wage rates etc. causes work to look undesirable therefore the labour market should be left to businesses and to the free market as it creates competitive and realistic wage rates to attract more people and allow more job opportunities.