Unemployment as an Economic Issue
Is unemployment a major economic issue in the world? And how does it affect economic performance? The percentage of unemployed individuals (who are searching for jobs and willing to work) in the total labor force is a key indicator of market performance for any country. There are negative impacts on the standard of living when a person loses a job or if not employed. Job losers (together with those eligible for unemployment benefits) may find themselves consuming much less than usual. They then end up draining their retirement savings so soon. In addition, prolonged unemployment usually leads to both skepticism about the value of education or training, and an erosion of one’s skills. Unemployment is also a key to the increased social problems. Areas with high unemployment rates (especially among youths) tend to have more crimes and vandalism (Chiricos, 1987).
Unemployment is very costly to countries since it leads to an increased payment from the governments for unemployment benefits such as health care and food assistance. This situation forces the governments to borrow more money due to a fall in tax revenue brought about by the decreased number of employed people to pay income tax. In addition, since these unemployment benefits are mainly financed through taxing businesses, high unemployment rate means taxing these businesses highly. This action indirectly discourages businesses from hiring more workers. Moreover, this issue lowers the gross domestic product (GDP) for the economy, making the country unable to allocate its resources efficiently.
Players in this Economic Issue
This study focuses on youth unemployment and will present persons between 15 and 30 years of age. It involves the youths without jobs, but they are available for work, and are also actively seeking employment. The main measure of the youth unemployment includes employed youth compared to the entire youth population, percentage of youth unemployed, and youth-to-adult unemployment ratio. One reason for increased youth unemployment rate is the mismatch between the skills a person has and the skills needed. Other reasons include risk avoidance of employers due to inadequate knowledge about the young employee, and asymmetric information (Alvaro, 2003).
Although prolonged stay in education system may later result to an opportunity for better employment, it also means less work experience. This situation has the opposite effect on youths’ integration in the labor market. It becomes a challenge for youths to secure a position in the job market since they are competing with the many jobseekers (with a number of years experience) for the few vacancies (Alvaro, 2003). Moreover, employers are each day becoming more selective in the recruitment process (since the number of unemployed individuals is high) and a job seeker fresh from school is usually the one not chosen. Governments have to come up with mechanisms aiming to create new jobs to reduce the unemployment rate particularly among the youths.
SWOT analysis of unemployment among the youths
This analysis focuses on the internal factors (strengths and weaknesses) that a country can control and how these factors lead to factors beyond the country control (threats and opportunities. Availability of programs for local counseling and increased youth participation in education and training are real strengths in many countries that can help turn young people into marketable employees at a later stage. Another important strength is the development of programs aiming at supporting youth entrepreneurship to encourage investment and young people involvement in highly motivated entrepreneurial activity. Some organizations like G20 Young Entrepreneurs’ Alliance and the World Economic Forum stress that young businesses and entrepreneur are the leading facilitators of sustainable growth and development and job creation (McNeilly, 2014). Improving the match between employers and young employees is another strength that any country should embrace. This action is the key to producing all round talented young job seekers and creators, and can reduce unfavorable job contracts, which in turn maximize the youth contribution to the economy.
The main weakness experienced is the inability of countries fight hysteresis. Many school leavers and other young unemployed individuals have the notion that past unemployment trend usually causes future unemployment. They believe that if a person stays unemployed for long, it is more than hard to secure a job in the future. This perception makes most youths stay without searching for jobs or creating one. It is within the capability of governments to develop mechanisms that aim at preventing this demotivation. This action will in turn open the young people’s eyes not just to sit and wait for a job to come on their way, but be job creators. Poor education system that provides young talents with skills that are not marketable to one’s country is another huge weakness. It is best for the governments and policy makers to study their country and economy carefully revise their education systems and come up with programs that only produce talents with the required skills in the job market.
After an in-depth analysis on strengths and weaknesses, government should focus on the external attractive factors (opportunities) that aim to solve this problem. Some of the opportunities include availability of investment schemes, revisions of entrepreneurship and other policies, technology change to suit the youths, academic excellence policy measures, availability of funding. The governments should try to implement and utilize these opportunities to reduce the number of young people, not in employment, education or training (NEETs).
Threats are always present while implementing these measures. Fall in output due to recessions may make youth unemployment to increase at a faster rate than the current unemployment rate. During this time, (cyclical Unemployment) youth workers are the most affected, since they are the first removed from work due to least job experience. Another threat is the increased in the proportion of NEETs. Depending on the level of education, some youths are more likely to decline low wages and instead prefer to remain unemployed for long waiting for the right job. In addition, some youths tend to migrate to other countries, aiming to get their desired job opportunities. This action poses a threat some countries by losing educated and talented individual, and when job opportunities come, these countries end up employing under skilled labor force.
Decisions to Implement this Economic Issue
The governments should fully develop small scale labor intensive industries. This expansion should be initiated both in urban and rural areas through both government intervention and investment incentives for the private sectors. This action will much utilize the many idle, skilled and talented brains.
Policy makers should also set plans such as funding the youths to utilize their talents and also support them focus on entrepreneurship through new products and service production. They should also enhance vocational education and training to guide the youth on how best to become a successful entrepreneur. Entrepreneurial businesses are the driving force behind creation of new technologies and globalization, which in turn creates more jobs (McNeilly, 2014).
In most countries, the higher percentage of employed individuals (both in government and private sectors) is represented by older people, whereby some of them do not deserve to work anymore due to their age. Due to the increased number of unemployed youths, and due to everyday change in technology, these elder individuals should give room to the young, talented and energetic persons who are changing with the technology. This action will in turn present new job opportunities for extra youths through fully utilization of the current technology.
References
Alvaro, J.L. (2003). Economic hardship, employment status and psychological wellbeing of young people in Europe. Youth Unemployment and Social Exclusion in Europe, 173–192.
Chiricos, T. G. (1987). Rates of crime and unemployment: An analysis of aggregate research evidence. Soc. Problems 34, 187-212.
McNeilly, A. (23 June, 2014). What is the solution to youth unemployment? Retrieved 2014, October 25 from www.smh.com.au › Small business › Startup
