Extent and Causes of Unemployment and Inactivity in the UK Today Essay

An economy population can be divided into two groups, the economically active and those economically inactive. The Economically Active is referred to the part of a countries’ population that is willing and able to work. This includes those that are unemployed and those that are currently and actively engaged in a particular job. The rate of unemployment is defined as the percentage of the unemployed that are unemployed and actively seeking for one. In this essay, I am going to discuss the extent of unemployment in the UK today. I am going to critically address the extent of unemployment by comparing geographical regions, sex, race, age groups and educational achievement. Then in order to conclude the extent of unemployment, I will argue about the true level of unemployment questioning both the weaknesses LSF and Claimant Count in measuring these challenges. The second section of this essay, I will state the 3 causes of unemployment in the UK and 3 reasons for inactivity. Then I shall evaluate the credible of the Coalition’s The Work Programme. Unemployment occurs when a person who is actively searching for work but unable to find one. In the UK today the current rate of unemployment is 8. 3% according to the Office of National Statistics (ONS). It shows that there is a 17years high unemployment in the UK. The ‘UK unemployment rose by 129,000 in the three months to September to 2. 62 million’ also ‘youth unemployment is now at 1. 02 million’. There are four main types of unemployment. There are two different measure of unemployment in the UK today. They are the Claimant Count and International Labour Organisation (ILO) LFS survey. The Claimant count is UK’s most timely measure. It measures the amount of people who are claiming benefit but are actively seeking employment. It does not take into consideration of those on disability benefit neither does it take account of people who do not claim the allowance. ILO makes use of the Labour Force Survey (LFS) to measures everyone without a job and has looked for work in the past four weeks and willing to start work in the next two weeks. ‘Unemployed persons include those who did not work at all during the survey week, and who were looking for work’. The faults in these two measures bring up the question of the extent and the true level of unemployment in the UK today. The Job Seekers Allowance (JSA) is means-tested and it depends on household income, this means husband or wife who have partner earning above a certain income are not included. It also does include people under the age of 18, therefore excluding 16 and 17 years olds who left education at post-16, this part of the economy should not be ignored by the JSA because these groups of individuals usually have low-levels of human capital there for potentially high unemployment rate amongst these groups. High youth unemployment shows underlying structural problems in the UK today. Therefore the JSA does not represent the true level of unemployment because there are people seeking work and are not included in JSA or/and counted as unemployed. The official measure also has its own faults. The LFS survey is a monthly questionnaire of 60,000 people. They are asked if they have been searching for work and would be able to take up work in the next two weeks. This measure usually gives a higher figure than the claimant count. Although the questions asked sticks to the UK’s definition of unemployment there are also problems with the measure. The survey has potential for error in sampling data in sampling 60,000 people and even most importantly people might not actually say the truth about their situation. Apart from the faults in the measures of unemployment, another issue is that there is a possibility that those classed as unemployed might actual be working. There will be a population of the economic inactive that receives unemployment benefit but still work in the black economy. According to the ONS, an individual is defined as Economical Inactive when they are ‘not in work and do not meet the internationally agreed definition of unemployment’. They are people without jobs who have not actively sought work in the last four weeks and/or are not available to start work in the next two weeks†. Inactivity in the UK accounts for 21. 3% of the working age-adults. The economically inactive include students, the sick and disabled retirees, homemakers and people who have not searched for jobs in the last 4 weeks – the main issue in the UK are these groups who are voluntary unemployment. ONS There are different viewpoints that will be addressed in evaluating the extent of unemployment amongst gender, geographical regions, race, age and educational attainment. ONS statistics show that the extent of unemployment amongst region varies in the UK. Over the period of July to September, this year, the highest unemployment rate was North East with 11. 6% of the population unemployed. It is followed by Yorkshire and Humber with 10. 6% of their economically active population. Over the same time period the south-east had the least rate of 6. 3 per cent. In the case of gender, In April 2011 female unemployment went up by 64,000, while male unemployment went down by 69,000’. Despite this statistics, the unemployment rate for men has risen faster than that of women while the economic upturns of males have dropped faster than that of females. Unemployment amongst Pakistani/Bangladeshi groups is the highest amongst people of different races with unemployment rate. The lowest are the whites British. Unemployment amongst people in further education is that they are more likely to be unemployment than university graduates over non-graduates. There has been a recent media attention to unemployment amongst 16-24 year old which has recently hit a record high with 20. 6% of that population without jobs. Another age group that is highly affect are the over 50’s, according to AgeUK, this age group is currently suffering from a 10 year high which most likely will be those in in long term unemployment. I feel the government must lay down a good foundation for a better job market for older people before forcing them to work longer. One of the Coalition government strategies to tackle this is The Work Programme which I am going to evaluate its effectiveness and credibility later in this essay. There are many causes of unemployment for example, recession, lack of skills, and lack of information, over-regulating, decline in industries, willingness to work and discriminating factors. Cause of Inactivity on the other hand is disability and leniency of the welfare system toward the voluntary capable economically inactive. Recession is a downturn in the economy of a country. It’s a drastic fall in countries GDP. One of the causes of unemployment In the UK today is the recent recession according to the BBC; the recent recession had a deep impact on jobs. According to the CIPD, the recession caused a loss of 1. 3 million jobs. The reason why unemployment rises is because during a recession, output and demand falls, firms cost optimise by cutting down on unnecessary expenditure or they resource optimise by reduce unnecessary workforce. The effect of resource optimisation leads to a rise in unemployment as there are less job positions in the economy. When unemployment increases, this can worsen the recession since there will be lower aggregate demand and lower growth rates in the economy. Although one can argue that the UK economy has survived the recession we are still being affected by loss of jobs that the 2008 recession caused. Generally, I think the economic decline is one of the main causes of unemployment today. Another cause of unemployment is the lack of demand for workers. The demand for worker is derived from the demand for goods and services therefore the bigger issue might be people not spending. This is a big issue because of the lack of jobs that people want. The government is trying to get the inactive active and the unemployed employed but the question is that are there any jobs for these people after they have been trained? One could argue that it is because businesses are not creating jobs there they are very few jobs that people might want to do in the economy. The leniency of the benefit system in the UK is the main cause of inactivity. People know that with jobs they can depend on the welfare state. The government aim to get people out of poverty can also affect the economy because of the unemployment trap. This is a situation whereby unemployment benefit acts as a deterrent or causes lack of motivation for an unemployed or an inactive individual in the labour to take up jobs or advantage his skills or perhaps in the case of an inactive individual gain necessary skills to enter the job market. Another cause of inactivity is disability in the UK. People claiming disability and sick benefit, these groups of people are also class. Another cause of inactivity is people retiring (65% men and 62% women). Apart from this, men are more likely than females to be classed as sick or disabled but women are more likely than men to be looking after the home and family. Statistics show that 26% of UK economically inactive people would like to work. Another main cause is the lack of education and training, especially currently in the UK, the government scrapping schemes like Education Maintenance Allowance (EMA), this will act as a disincentive for people wanting to entering education. With issues such as this, young people will be affected because the lack of post-16 education will mean they are more likely to end up in a dead-end job. There are special skills needed for certain type of jobs. To become a doctor, one has to go through years of education to be full qualified. The years of education and training are their specialist skills are gained. Statistics show that the opt-in rates of people entering into higher education will reduce because of the lack of EMA which might affect these people that refuse to participate in education in the future. ‘The Work Programme is a major new payment-for-results welfare-to-work programme†¦ Along with the Universal Credit benefit reforms, it is central to the Coalition Government’s ambitious programme of welfare reform. The simple aim of the programme is to cut down the United Kingdom long-term unemployment. The strategy the coalitional government is to pay private firms to make the process easier. The government believes it will be cheaper in the long run to pay these private firms rather than pay for benefits. According to the programme, an estimated 605, 000 people will go through the programme. In 2011/2012 in the year 2012/13 it aims at 565,000. Providers include companies like Working Links, Triage A4E, Serco and many more. The government has awarded a least two providers in every region. These private firms the government outsources the job is referred to as providers. Providers are paid totally on results. The idea is to create for the workers a sustainable job outcome for those participating. The longer an individual stays in work the more the providers get paid, therefore creating an incentive for these firms to provide continuous support for participant. One could argue that the scheme helps tackle the challenges of unemployment because there are special skills needed for certain type of jobs. The problem with The Work Programme is that it could be used to generate cheap labour for dead-end jobs. Because it will be based on payment by results, the providers will do their best to make sure they are correct and therefore get their fee. Another problem with the scheme is that it doesn’t have much difference from other schemes. I think it will strengthen the competition for ‘job ready’ participant and these are people who are likely to have got the jobs anyways. The difference is that the provider will be able to claim a larger fee compared to previous schemes. There are few other problems with this reform, this reform is largely untested and it is not big enough of a scale to make a serious dent in the problem. The worry is that providers will end up picking individuals who are more likely to get jobs and therefore ignore the unemployment ‘black spots’. Another issue with it is that there is an assumption that unemployed are bunch of people that ready to work. The vast majority of unemployed are involuntary, many have the wrong skills and in the wrong geographical location. Also some of these people are ill health to be at work. According to the study done by the London School of Economics it showed that the providers will miss the set targets by 90%. I think the introduction of ruthless competition could also lead to companies going after the same jobs and therefore not benefitting people that it was for in the first place. It could end up being a revenue or sales maximisation aims rather than actual target people like the long term unemployed who are further down the unemployment scale. For The Work Programme to really succeed, I think these organisations need to make sure they take on people that have been in long term unemployment: people that have grown comfortable with life on benefits. The government also needs to start creating jobs. One can question the fact the scheme will succeed when there isn’t actual jobs for these people in the first place or at least job that they want to do. With the average of six to every vacancy the government has got a lot to do. According to a new research by the Social Market Foundation (SMF), the paper is called, Will the Work Programme work? This paper scrutinises the viability of the Work Programme by predicting the performance of the firms providing the programme during its first three years of it being active. This forecast will be based on the welfare-to-work scheme called the Flexible New Deal. This is the predecessor to the Work Programme. According SMF analysis, it suggests that the providers will not meet their set minimum expectations in the first 2 years of the programme and even in the third year 22 out of the 24 FND providers would fail to meet the requirements for the scheme. The department has threatened to lapse the contract of providers who don’t meet the benchmark set. This further threatened the credibility of the scheme. According to the Chris Grayling, the Employment Minister states that dismiss this research as â€Å"flawed†. He claimed that it is possible to compare DWP to FND. His argument is centred around the fact that FND involves different groups of Jobseekers to DWP and therefore one should not compare both schemes. One can argue that the Flexible New Deal is more effective because its analysis is carefully based on comparable groups of long term unemployment which is the target group helped by the DWP. Although these groups of job seeker are easily comparable, the different between the schemes remain. Even on the optimistic assumption, it concludes these DWP performances are not realistic for most providers. The Work and Pension committee of the House of Commons recently demand clarity over the Work programme have come up with these challenging target and many of the providers have expressed their doubts the unrealistic targets of the scheme. Also in the recent economic climate, claimant count has increased by a significant value since the bid of the Work Programme were invited and I think don’t think the future is precarious or do not agree on its being a credible solution. I also think to find a credible solution to tackling unemployment. DWP has to revise its minimum performance expectations and perhaps introduce a more credible incentive for its providers. It could also establish greater transparency about how to derive its estimates of minimum performance and also make clear how this might vary if economic condition deteriorates this will therefore create greater accountability and certainty. When this is done, I think The Work Programme will then be a credible solution to tackling unemployment.