The International Labour Organization (ILO) defines unemployment as a state “when people are without jobs and they have actively looked for work within the past four weeks”. The unemployment ratio is calculated by measuring and dividing the current unemployed individuals by the current employed individuals in the work force.
Not only US, other countries like UK, India, China, Japan, Russia, Australia and New Zealand is facing unemployment, albeit at different levels. I will not go into blaming governments and industries, capitalism and socialism, discussing who is at fault.
The prime concern here is to assess the present levels of unemployment, the kinds of unemployment we are facing today and a brief look into future employment possibilities.
Comparative Unemployment
Please see the figures on the right-hand top corner of the article.
Note: All images given are author created.
Ever since the economic downturn in 2008, very less improvement has happened in the unemployment ratio. While US, India and UK have almost same unemployment percentage, New Zealand and Australia have unemployment between 4%-6.5; and China, Russia and Japan have below 5% unemployment ratio.
Despite various government subsidies, financial assistance, and educational programs to train people with specific skills, there is a lack of significant reduction in unemployment in the last three years.
The global economy is riding on tenterhooks. Report released by the ILO in January says that half of the global working population, which is almost 1.5 billion people, have insecure jobs. Even though the economy saw marginal growth in 2010, it could leave a positive impact on the unemployment ratio.
A more shocking revelation is that the age group of unemployed people falls between 15 and 24 years youth who are actively seeking employment without any result. The percentage of jobless youth stands at a staggering 12.6%.
Kinds of Unemployment We Have Today
[1] Classical Unemployment – A condition when the wages of people are higher than what the market can pay, owing to which the demand for employment increases beyond the number of available vacancies.
[2] Cyclical Unemployment – Economists theorists reject the idea of cyclical unemployment but some economists accept it as a fact. The Great Depression of the 1930s was an example of cyclical unemployment. In this employment decreases when there is no work and again increases when demand increases.
[3] Involuntary Unemployment – Underdeveloped urban societies and agrarian societies do not officially believe in the concept of involuntary unemployment. It is a condition when people are thrown out of work ‘involuntarily’ and find it difficult to gain employment. In other words, this is what we know as layoffs.
[4] Structural Unemployment – This is a condition where jobs exist in the market but the labour market is unable to provide jobs to all of them because there is a visible mismatch between the skills required for the job and the skills of the applicants. Moreover, persistent cyclical unemployment can give rise to structural unemployment because the skills of the workers tend to get obsolete or rusty.
[5] Frictional Unemployment – This kind of unemployment when there is imbalance between demand and supply. Also known as search unemployment, it is composed of individuals who are both voluntary and involuntary unemployed. New graduates or new market entrants also fall under this group.
[6] Hidden Unemployment – The unemployment rate of any country is officially underestimated because of the presence of hidden unemployment. This term includes people like who have taken early retirement for fear of losing jobs, people who are in full-time education, people working under “retraining” programs of the government or those individuals whose unemployment is actively not reflected in the statistical data because they are kept hidden.
[7] Long-term Unemployment – The European Union defines long-term employment as a condition when an individual has not able to get a job for more than one year. The Bureau of Labor Statistics marks this waiting period as 27 weeks. However, a new term called “99ers” has emerged in US economy where 99 denote the number of months an individual has remained unemployment. As per the present consensus data the number of “99ers’ has drastically aggravated in the US.
One thing is sure, because of hidden unemployment, the official statistics on unemployment may not be that factually correct.
Future Employment Possibilities
Since the US, UK and India are high on the unemployment radar; I will discuss the future employment possibilities of only these three countries.
United States –
The US Bureau of Labor Statistics have finalized an Education and Training Classification System that will replace the present education or training categories and project employment possibilities for 2010-2020.
Prior to this system, the education, experience and on-the-job training were mutually exclusive components for deciding upon employment. This led to industry confusion whenever hiring was concerned.
Under the new system, these components are not mutually exclusive anymore. The BLS system will provide all the three dimensions of education, experience and on-the-job training to all occupation, thus increasing the employment ratio.
On February 1, 2012, the employment projections till 2020 will be released. You can subscribe for them here.
At the moment, there are four issues on the top of US Government’s agenda: debt reduction, job creation, budget deficit control and lowering trade deficit. The era of President Obama is slightly different from his predecessors. The US economy has ceased to remain as a solely manufacturing economy. Lack of jobs is due to:
Globalization because American business is going overseas, reducing domestic jobs. Lack of specific skill sets in e-business era despite opportunities available for skill building.
Regardless of the different political ideologies, it is definitely “an urgent time” for America, as President Obama said on Sept. 8, where he urged politicians to “stop the political circus and actually do something to help the economy” and implored them to clear the American Jobs Act.
Many will agree that the job market in the US is highly unstable at the moment. With politicians quibbling among themselves, they are sidestepping the most important issue in hand.
Not only this, the economic scenario in the US is impacting other countries like China and India who rely on the US for export and technology. If industries in the US move abroad for better opportunities, the present situation will become worse. With loss of domestic jobs, where would US citizens turn to?
As we know, the online market is very big in the US but small entrepreneurships and start-ups is not enough to pull you out of the financial crunch.
Serious steps need to be taken by the government. One can hope that the new Education and Training Classification System proves to be fruitful for this decade.
United Kingdom –
The condition of UK is not different from the US. Both are facing similar reasons for unemployment and there is no reprieve in view.
The UK public sector has lost around 250,000 jobs this year and there are more than 2.5 million unemployed. Government is relying upon private sector to create sustainable jobs, says the Office for National Statistics, but this only a short-term solution, Ed Miliband, the Labour leader said.
The number of 16-24 year olds out from work rose significantly from 78,000 to 973,000.
Describing this condition as “disappointing”, the Prime Minister David Cameron blamed the previous Labour government that “robbed young people of their future by piling up debt”.
Industry experts like Howard Archer of IHS Global Insight commented that the Labour government report is “worrying” because it “indicates that the economy’s persistent weakness, lower business confidence and public sector job cuts were now feeding through to take a significant toll on jobs”. In the same vein, Citigroup economist Michael Saunders says that “worse news probably lies ahead. The number of redundancies is up quarter on quarter, while vacancies are falling”.
One can find individual grievances on Facebook and Twitter sharing their unemployment stories; some of them have been unemployed for the last 3 years while some other are losing out on prospective jobs because employees are paying very less.
There is no immediate solution visible for the UK. One has to wait and watch.
India –
The reasons for unemployment in India is different from the US and UK. Even with more than 9 percent unemployment ratio, India need not worry about unemployment seriously.
Why? There is unemployment in the US and UK not because of lack of skills but due to an overall economic downturn where employees are hiring low-cost professionals and concentrating on youths, not bothering to absorb a readily available resource of skilled professionals. It is another issue that those who are not skilled are finding it difficult to manage employment for other reasons altogether.
Comparative, both private and public sector jobs are available in India but the main problem is the lack of adequate skilled professionals. There is a large resource pool of youth in India but an equal shortage of skilled manpower due to which youths remain unemployed and companies face manpower shortage. If the demand of skilled manpower is met in the next 2-3 years, the unemployment ratio will decrease drastically.
Of course, this is not to say that the economic conditions in the US and UK have not impacted the job sector in India. A global survey conducted by Manpower revealed the third quarter hiring in India fell steeply this year. This steep fall was primarily seen in the IT industry, online business, and export products.
A Human Opinion . . .
No matter who the next President and Prime Minister is in the US or UK, the current unemployment situation needs to be given a very serious consideration, which should go beyond politics.
As far as I can analyze, US and UK should conduct a detailed industry analysis, especially the hiring processes and try to retain domestic jobs for the next five years, at least till the unemployment scenario improves drastically. Bringing in professionals from other countries should be allowed only when necessary. Of course, this does not include the freelancing industry that is booming today because this industry is based on skills and creativity, both of which cannot be domesticated within any country.
Secondly, India should focus on developing skilled manpower for both private, public and government organization.
The rest of the countries shown in the pie charts should take heed from the present economic situation and begin to take preventive measure at the earliest.