In 2008, USA went through a financial crisis due to the crash of the housing market. This led to a lot of house owners defaulting on their loans. Therefore, banks and financial institutions collapsed and filed for bankruptcy. This failure of financial institutions led to millions of people losing their jobs. Since, most companies rely on loans from banks and financial institutions, corporations too started to carry out cost cutting method, which mainly included the layoff of workers. The impact of this financial crisis was spread all over the globe, including United Kingdom. UK first felt the financial crisis when the Lehmann Brothers filed for bankruptcy. The major social problem of this financial crisis for UK was a rising rate of unemployment, as millions of people lost their jobs.
LITERATURE REVIEW
Financial crisis of 2007-2008 was due to the sub-prime housing mortgage crisis in the United States of America. The mortgage crisis was because too much borrowing took place and loans were given to people even with bad credit history. The price of houses were thought to always rise, leading to people investing in the housing market by taking up high-risk mortgages. However, home prices stopped rising and the borrowers could not afford to pay the mortgages. This resulted in a record number of people defaulting in their loans, hence banks and investors lost a lot of money. Therefore, this led to the failure of banks and other financial institutions as they faced liquidity crisis .
The financial crisis resulted in the collapse of one of the most prestigious financial institutions, i.e. The Lehmann Brothers. Lehmann Brothers filed for bankruptcy in 2008 due to the credit crunch and mortgage crisis, while others like Merrill Lynch was taken over by the Bank of America. The collapse of Lehmann had a huge impact on the employment of tens and thousands of employees, and pushed UK into recession too . Today, the stats and figures show that the US housing crisis is considered as being worse than the Great Depression .
When the recession hit the job market, Europe, including UK, entered into a recession. In 2008, UK reported its largest rise in unemployment in the last 17 years. The number of people unemployed was reported to increase by 164,000 in the three months to August of 2008. The rise took the jobless rate to 5.7%. By the end of the year 2008, unemployment rose to 2 million. The number of Britons out of work, who applied for unemployment benefits rose to 2.9%. Manufacturers laid off 46,000 workers in the 3 months to August. Job losses were spread across the economy, with companies all over Britain announcing job cuts and layoffs. The number of employed people dropped 122,000 to 29.4million over the three-month period. Fewer jobs were being offered, as the number of job vacancies dropped by 62,000 from a year ago to 608,000 in the three months to September 2008 .
In 2009, unemployment jumped by 220,000 in the three months to June to 2.435 million, official data showed today, which is the highest level since 1995. The Office for National Statistics said that the unemployment rate was now 7.8% of the total labor force available in the United Kingdom. The figures also showed that the number of people in work dropped by 271,000, which is the highest drop since 1971. The number of unemployed people under the age of 25 also rose. The increase was of 50,000, leading to the total number of unemployed people, under the age of 25, to reach 928,000. This resulted in a lot of unemployed people claiming the unemployment benefits, hence costing the government £3.4 million per day. The ONS also reported a small rise of 25,000 in the number of people claiming jobseeker's allowance. Under that measure there were now 1.58 million people claiming benefit, equivalent to 4.9% of the workforce, which was the highest rate since October 1997. Also, claimant count doesn’t represent the true picture of people unemployed. So, the picture was even graver. Moreover, the ILO also showed that the employment rate of 16 and 17 year olds also dropped to 28.6% in April-June of 2009 as compared to 34% in 2008. The employment rate of people from age groups of 18 to 24 also dropped 59.8% from 64.1% .
In 2011, unemployment in UK rose by 114,000 between June and August to 2.57 million, a 17-year high, according to official figures. Also, according to the Office of National Statistics, unemployment rate increased to 8.1%. Youth, i.e. people belonging to the age group of 16-24, were one of the biggest sufferers of this recession. The total number of jobless youth increased to 991,000, with a jobless rate of 21.3%. The number of people out of work and claiming benefits rose 17,500 to 1.6 million in September 2011. The number of people employed as part time workers decreased by 175,000. Moreover, the number of people employed and being over the age of 65 also decreased by 74,000 .
It was believed that UK had exited the recession in 2009, as she showed growth rate rising. However, in 2011, it entered recession again as it showed negative growth in 2 consecutive quarters. In the last quarter of 2011, UK’s unemployment rose to its highest level in the last 16 years. The unemployment rate, according to the figures of International Labor Organization methods rose to 8.4%, which is the highest since January 1996. The rise was from 8.1% in the three months through August. The number of people claiming for unemployment benefits rose for a tenth consecutive month to 1.6 million, which was the highest since January 2010. The unemployment in UK rose 118,000 in the quarter through November to 2.69 million, which is the highest level since 1994. In the last month of 2011, claimants to unemployment benefits increased by 1,200 .
The youth of UK, being amongst the biggest sufferers, saw the number of unemployed youth increasing to figure that were more than 1 million. This increase in 2011 was the highest in the last 15 years. According to reports, the number of unemployed people belonging to the age group of 16 to 24 increased to 1.02 million. This essentially means that 1 out of 5 young people were now out of work. The total of unemployed was 2.62 million, which was the highest since 1994 .
Women suffered a lot too because part-time jobs are mainly held by women. Because of the loss of 175,000 part time jobs in 2011, women unemployment rose to a record high since 1988. 75% of part-time workforce comprises of women. The reason behind this is that most women have family obligations, so they cannot stick to one, permanent job. The Government said it was taking steps to support growth and rebalance the economy, including the creation of 11 new enterprise zones, designed to boost local growth and create more than 30,000 new jobs by 2015, four annual reductions in corporation tax, cutting the small companies rate, expanding loan guarantees and investing in science and apprenticeships .
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