Introduction
According to the Bureau of Labor Statistics, there are more than 322 million people residing in the United States and nearly 4.70 percent of those who are capable of working are unemployed as of May 2016 (2016). This unemployment rate may not be alarming since 4.70 percent is such a small number, but when converted, this small percentage accounts for more than 10 million unemployed individuals. Unemployment is among the alarming issues in the society and that should not be ignored. For instance, its relevance in the society makes a country's economy suffer. Unemployment causes the national output to be lower and the government to spend more in order to look after these unemployed individuals. Moreover, the problem does not necessarily lie on the citizens alone. One can say with certainty that there are many unemployed individuals who continually seek jobs, but fail to acquire one that can provide them with a comfortable life. The real problem lies with the mismatch in the available jobs nearby and the skills that an unemployed individual possesses. Say many unemployed individuals had prior experience in the field of agriculture and would most likely paid enough for their skill set. Their skill set would be irrelevant in a city where the job demands mainly ask for individuals with experience in information technology or finance. The world is ever changing and along with it is the demand in the workforce. Technological changes likewise render many skills unnecessary due to automation and the fewer errors that machines can make. This type of unemployment is also known as structural unemployment and may be combatted through various methods and policies. This paper will likewise discuss why the most efficient way to reduce structural unemployment is by educating or training individuals to meet the changing demands of the society. Furthermore, a review of related literature will be conducted in able to convince readers that it is in fact the most efficient method to reduce structural unemployment.
Body
Background Information: Structural Unemployment
Unemployment rate simply refers to the percentage of unemployed people in a population. In the above example, the unemployment rate is the 4.7 percent of the 322 million residents of the United States. Furthermore, there are three main types of unemployment that are recognized by economists. These are frictional unemployment, cyclical unemployment and structural unemployment. Frictional unemployment is unavoidable and comprise of those who have decided to seek better jobs or change their career path. This type of unemployment is likewise among the reasons why unemployment rate cannot be completely reduced to zero. There are always people who are between jobs or those that quit and seek other jobs. On the other hand, cyclical unemployment refers to the unemployment that are caused by a recession in the economy. This means that there are no demands in the labor force which forces others to be unemployed. Lastly, structural unemployment is the unemployment that results from the conditions in the economy other than the decreased demand in the labor force. This includes the unmarketable skills of unemployed individuals, automation in the workplace and the like (Baumol & Blinder, 2008). Moreover, the focus of this research paper would be structural unemployment since they are considered to be relevant in today's society and affect majority of those who are unemployed.
Relevance of the Study
According to Baumol and Blinder (2008), when the economy of a country grows slowly than it should as expected from its potential, then there becomes a rise in the unemployment rate. This is a vicious cycle since a slow economic growth can likewise be traced back to the unemployment. However, why should unemployment be of utmost importance? First, as stated earlier, unemployment slows down economic growth. Hence, it can be concluded that unemployment contributes to the incapability of a country to function well and maintain a certain standard of living. This resonates in the health care services and educational policy of a country. Without the necessary resources to fuel social policies, then the society might as well stop depending on each other. If unemployment continues to persist, the government would focus a considerable amount of its resources to aid the unemployed. There have been many countries that provide financial assistance to unemployed individuals and the cost that it entails cannot be belittled. Instead of getting aid from its citizens to produce the needed resources, the government shoulders many of its citizens. Thus, leaving less money for other social services. Furthermore, with unemployment, one is forced to live in a less comfortable setting. As such, the health and the education of a family can be compromised. Without income, a household may not be able to contribute to the society’s economic growth and further worsen the situation. Not to mention, there are many domestic disagreements that arise from the inability of one of the household to support a family. Furthermore, how can structural unemployment be reduced? First and foremost, it should be realized that combatting structural unemployment should be shouldered by anyone who relies on the economy, such as the government, private entities and the society in general. As such, for this paper, educational and training programs that are hosted by the government or private entities will be given emphasis. These educational and training programs are likewise solution for the unmarketable skills of unemployed individuals, the automation in the workplace, and the increasing competitiveness among those in the workforce, which are characteristic of structural unemployment.
Literature Review
This research paper will review related literature to prove that education and training programs are necessary and the most effective way to reduce structural unemployment in the society. In the review of related literature, articles or journal articles from select database will be used.
A study way back in 1983 conducted by the Organisation for Economic Cooperation and Development in Paris, France had emphasized that education and training can help with the problem of unemployment in the youth. When young individuals enter the age that are considered to be suitable for a job, problems with their employment arise. For instance, the need for manpower has been greatly reduced in many companies due to the advent of technology and the convenience that it had provided and continue to provide. Some of this young individuals were also mentioned to misunderstand that proper education and training is an advantage in a workplace where the demands do not go in one's favor. Moreover, this study had found out that there are many countries that had solved their unemployment crisis by providing skill training, particularly to those that have high demands in the market, and/or apprenticeship. These programs are likewise separate from the compulsory educational attainment required for individuals to qualify for certain jobs. Furthermore, this study had also emphasized that the educational system should be reformed in a way that it allows young people to transition into the working environment more easily. Schools should encourage the training of skills that are relevant to the demands of the workplace and those that can allow young individuals to succeed in their prospective career path.
This study can be used to back up the hypothesis that education and training can be used to reduce unemployment, specifically structural unemployment. The young individuals in the study can be considered to be suffering from structural unemployment since they have the educational background, but lack the experience and skills to satisfy existing demands in the market. The automation in the workplace makes things even worse for those who seek well-paying jobs. The solution that worked for this particular study was the provision of skill trainings. There appears to be no reason to not assume that this can be likewise applied to other individuals who may not be considered young or those that are not new in the labor market. They share the same dilemma since the competitiveness in the market and their lack of skills and experience cause their unemployment. Surely, educational competitiveness can likewise be a solution to reduce structural unemployment regardless of one’s age. Moreover, this study does not necessarily conclude that this method to reduce structural unemployment to this day since the study was conducted in 1983. Many factors that affect one’s chances of being employed have evolved since then and should be taken into account for this research paper. Furthermore, a more recent literature will be discussed.
In a study conducted in 2011 by the Organisation for Economic Cooperation and Development Economic Surveys, they further examined the extent by which reforms in the government can reduce unemployment. This study takes a step further and determined whether certain reforms can make a country’s market more competitive. The focus of this study is the recovery of Ireland from being a country with an alarming unemployment rate to a country with enhanced economic growth and increased national output. Ireland tacked the problem using three approaches. First, they ensured that work pays are enough to sustain a comfortable lifestyle. Second, the government of Ireland assisted in the unemployed individuals to have marketable skills and contribute to the country’s output. Lastly, they assured that businesses are internationally competitive by restricting business costs. These approaches had managed to rekindle the economy of Ireland. More about employment, the study discovered that when Ireland adopted policies to help unemployed individuals by referring them to companies, their strategy failed and resulted in a considerable amount of money to go to waste. As such, they focused more on training programs that could help labor allocation. These training programs helped individuals level up in terms of skills. Thus, allowing them to enter the labor market more competitively. Further improvement in the training programs, likewise included the diversification of the training programs offered. As for younger unemployed individuals, vocational education and appropriate training programs proved to reduce structural unemployment.
This more recent study can likewise reinforce the hypothesis that education and training can reduce structural unemployment. There can be other methods to reduce structural unemployment such as the referral from the government, but they are not as effective as the aforementioned measure.
Many studies had likewise proved that education and training are necessary to reduce structural unemployment. Borneo had an alarming increase in their unemployment rate in 2011 that was resolved by training locals to keep up with the evolving labor market. As such, they acquired skills that allowed them to become more marketable and employable. Thus, Borneo had successfully combatted an increase in their unemployment and possibly reduced the negative repercussions of it (The Borneo Bulletin, 2011).
Another study supports the claim that education and training can significantly reduce structural unemployment. An analysis of the different methods that the United States had adopted to reduce unemployment had shown that there are only two methods to be significantly effective. The first one is assistance with job search and the other is the provision of training programs that can allow unemployed individuals to acquire skills that are in demand. Any other programs adopted proved to have no significant capability to reduce unemployment (Nie & Struby, 2011). This study had proposed two methods, however, there are studies that have proven that job search assistance is not as effective as the provision of training programs and could cost more. Furthermore, this study, along with many studies had backed up the hypothesis that the key to reducing structural unemployment is by making unemployed individuals more marketable by helping them gain in demand skills through appropriate education and training.
Despite the effectiveness of providing suitable education and training to unemployed individuals to reduce structural unemployment, the government alone cannot shoulder combatting unemployment. Furthermore, there have been policies that can provide training to unemployed individuals with the help of private entities. Training subsidies are provided to firms so that they may train individuals so that they become more competitive in the labor market. A study had used a data that spans three years to determine if involving firms or private entities to train individuals can help. This study further concluded that firms that received subsidies to train individuals to be more competitive in the labor market had ended up delivering positive results. The training hours had become more extensive while the skills of the said individuals became more likely to meet the demands of the labor market (Holzer, Block, Cheatham, & Knott, 1993). This study had likewise backed up the hypothesis that training individuals can upgrade their skills and become competitive in the labor market. If companies start training their employees continually, then the need to lay off employees since they are no longer needed can be reduced. Thus, reducing the chances of being unemployed due to the automation in the workplace. An employee that continues to adopt with the evolution in the labor market is less likely to be replaced by machines. While machines can make tasks accomplished faster, manpower will continue to be in need.
A study had likewise proven that education and training are long-term solutions rather than a Band-Aid solution for structural unemployment. According to Lechner and Wunsch, in a span of 10 years, it can be concluded that continuous training programs are directly correlated to a reduced unemployment rate (2009). This study had likewise proven that investing on training programs can produce desirable returns for a government and its economy. Thus, supporting the conclusion that education and training are efficient ways to reduce structural unemployment.
Conclusion
While unemployment can never be completely eradicated due to the presence of frictional unemployment and the difficulty in matching all unemployed individuals with their preferred jobs, there are available measures to reduce it significantly. Structural unemployment is among the most persistent types of unemployment in many countries across the globe and many studies had supported the claim that when you help equip individuals to become marketable in the labor market, then there is a chance to stimulate a country’s economy and reduce unemployment’s implications. Improving the educational system so that young individuals can contribute more efficiently to the economy is among the first step to reduce unemployment. Furthermore, training individuals with the help of the government and private entities can likewise help them become more adapted to an ever evolving labor demands.
References
Baumol, W., & Blinder, A. (2008). Macroeconomics: Principles and Policy. Cengage Learning.
Holzer, H., Block, R., Cheatham, M., & Knott, J. (1993). Are Training Subsidies for Firms Effective? The Michigan Experience. Industrial and Labor Relations Review, 46(4).
Lechner, M., & Wunsch, C. (2009). Are Training Programs More Effective When Unemployment Is High? Journal of Labor Economics, 27(4), 653-692. doi:10.1086/644976
Nie, J. & Struby, E. (2011). Would Active Labor Market Policies Help Combat High U.S. Unemployment? Economic Review- Federal Reserve Bank of Kansas City, 35-69.
The Borneo Bulletin. (2011, September 28). Borneo Bulletin: Training Locals to be 'marketable' to Reduce Unemployment Rate. The Borneo Bulletin. Retrieved July 3, 2016.
Organisation for Economic Cooperation and Development Economic Surveys. (2011). Structural Reforms to Reduce Unemployment and Restore Competitiveness. Organisation for Economic Cooperation and Development Economic Surveys.
Organisation for Economic Cooperation and Development, Paris France. (1983). The Role of Education and Training in Relation to the Employment and Unemployment of Young People. Organisation for Economic Cooperation and Development, Paris France.
U.S. Bureau of Labor Statistics. (2016). U.S. Unemployment Rate by Year. U.S. Bureau of Labor Statistics. Retrieved July 3, 2016, from http://www.multpl.com/unemployment/table
