The aftermath of the 2007-2008 global economic recessions indicates a slow economic recovery with most countries still adjusting to new ways of improving their economic status. The subsequent result of this slow economic growth is massive unemployment rates as the companies adapted employee lay-offs so as to reduce the cost of production as well as cope with the economic crisis. These massive lay-offs as a result, had affected the labor sector in many countries and despite the efforts to adjust the situation after the crisis; unemployment rate remains high with the youths being the most affected population. This paper therefore outlines some of the factors that have alleviated unemployment in the formal and informal sectors as well as highlight some of the ways that could be used to handle this economic condition
Unemployment level in the economy is determined by the percentage of the number of people with no job, yet they are in the labor force (ILO). The level of unemployed people by the end of the year 2013 estimated to 201.8 million as per the ILO statistical report (2013). This indicates an increase in the number of unemployed people by five million in regards to the 2012 report. Among those unemployed, young population is highly affected with the issue with over 74.5 million people aged between 15 to 24 years having no jobs at the end of the year 2013. In the US for instance, the number of unemployment aid applications in August 2014 only stood at 704 thousand applicants. Such tremendous increase poses a concern of likelihood that the number of unemployed people is likely to increase in the future especially as a result of the global population growth rate. According to the estimated statistics by the International Labor Organization, approximately 215 million people will be unemployed in 2018.
Increasing rate of unemployment does not mean that there are no new vacancies being creating by the employers. Instead one of the factors that have stimulated this increase in unemployment can be traced back in the 2008 global financial crisis. After most people lost their jobs, it has become hard for the organizations who are recuperating from the crisis to fill in the laid-off positions and create new posts (Levi, 107) This means that the rate of cyclical unemployment is still high especially as a result of slow economic recovery by both developed and developing countries especially those that were severely affected by the 2008 economic crisis.
Most workers who were laid-off are also afraid to look for new jobs in addition to the fact that some organizations may not be willing to hire them due to lack of required job skills. This is because the prolonged unemployment period could result to some people losing the needed skills especially due to advancement in technology and new ways of doing particular tasks. Employers are also avoiding hiring such employees as a way of avoiding the cost of training. Technological advancement is another factor that is replacing manual labor as work that was initially done by people is now done by machines.
Subsequently, increased level of unemployment has stimulated to an increase in poverty level in most countries. Majority of unemployed population have directed the attention to self-employment while others are employed in informal and manual jobs with no work contracts and low wages among other employee benefits. Increased unemployment also affects the country’s fiscal expenditures spent on early retirement plans and unemployment benefits (Levi, 57). This is a case that Spain experienced whereby they spent 2.9 percent of the GDP on the early retirement plans and employment benefits in the year 2013, thus increasing the country’s public debt. In addition, prolonged unemployment is likely to have a negative impact on the economic growth of respective countries.
As more people remain unemployed, it means that the tax contribution which is one of the main sources of the government revenue is reduced. In addition, as people lose their job, there is a rise physical and psychological issues that could require medical attention and this indicates that the government has to spend more in increasing the number of health facilities. The reduced income and high spending by the government could result in increased borrowing or alternatively, the government could opt to cut on the total expenditure, thus resulting to further social and economic issues.
Continuous uncertainty on the future of the global economy remains a hindering factor in reducing the level of unemployment. Fluctuations in demand and supply especially in imports and exports as a result of the global financial crisis has made organizations reluctant to invest in new locations or hire more employees due to the uncertainty in future growth. This means that there is more that need to be done in order to alleviate the economic growth. One of the ways of creating more jobs is to adjust the existing international trade regulations and monetary policies so as to increase international business operations and increase money circulation for business expansions respectively. Improving education system is another way that will ensure that the graduates acquire skills in accordance to the current requirements in respective job sectors and have the ability to start their own businesses, hence reducing the level of unemployment.
Works Cited
International Labour Organization. “Global Employment Trends 2014: Risk of a Jobless Recovery?” Retrieved from http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_233953.pdf.
Levi, Maurice. The Macroeconomic Environment of Business (Core Concepts and Curious Connections). NJ: World Scientific Publishing, 2014. Print
