There’s no denying the fact that now in this world, everybody faces problems, in every culture, every field and even everyone. The business world or economic science is no exception. As Paul De Mewre stated: “Money makes the world go round…” and indeed makes the world the way it is at the moment. With money, there are jobs, and with jobs, there will be people willing to perform jobs at the expense of money. However, what happens when there are no jobs available for people whose abilities comply with the requirements of the occupation? The answer is simple: a phenomenon called “unemployment” occurs. Unemployment merely is defined as the event wherein a person is of age, not employed but who are searching for a job actively (Tadeo, 2017).
The factors to which this event is being faced as an economic problem nowadays may involve the following: a) the dismissal or the ending of the contract of the current employees, b) the rate to which the jobs are being found, and c) the rate of the exit and the entry of workers. Various studies have been performed, but there is no direct reason why unemployment occurs in a certain region (Dullien ; Guerot, 2012, pp. 45-48). One example of a country which has experienced unemployment in Spain, from the article that was given in this context, to which it stated that the country experienced a decrease in the unemployment rate. Still, the existence of this problem threatens the very economic foundation of the country and may affect the nation as a whole once left untreated. In the economic world, as it was mentioned in the paragraph above, challenges still rise despite the fact that in this field of science, the balance between the usage of resources, whether natural or even human labour, and money as a medium for trade is being studied and being preserved (Monti, 2014).
2.0. Challenges faced by the Economy
Disturbance in the balance may result in different problems. Such concept is evident in phenomena like unemployment, wherein the balance between human workforce and available jobs is not met, therefore causing further problems in the society, in which, to the most extreme, may even reach poverty or famine and all social problems that are related to the ones aforementioned. As it was defined earlier, this event is caused by the person being unable to find a job even though the person is capable of doing it (Diamandouros, 1994).
Furthermore, as an in-depth discussion of this phenomenon, there are different types of unemployment: a) Demand Deficient Unemployment, which involves another economic event called the “recession”. This is also defined as a significant decline in any activities in the economic world that is spanning for few months, to which it will force companies or employers to cut the number of employees smaller to meet the demand. b) Structural Unemployment, to which the problem focuses on the workers’ part with reasons being lacking necessary abilities of skills in order to perform the task. c) Real Wage Unemployment, to which it occurs when wages (or salaries, depending on the type of job a person has) are kept above the equilibrium artificially, to the point where companies could lead this, thus promoting an excess supply of labour and lack of workforce or labourers. d) Frictional Unemployment, to which this concerns the period of a person’s life wherein during the time he or she was looking for a job suitable for his or her abilities (one good example is a student graduated from school), and the last one. e) Voluntary Unemployment, and as the name suggests, it involves a person being unemployed by choice due to reasons like avoiding taxes, duties, or sometimes done as a protest to the somewhat unfair society based on his eyes (like with the amount of wage he is earning for that particular job), and the likes of these actions (Moore ; Selchow, 2012). These types that were shown and that were briefly discussed signifies that there are indeed factors that affect this phenomenon. Regardless of the types aforementioned, one common perspective is evident throughout that unemployment does involve the relationship between the work available and the workforce ready to take the job (Tadeo, 2017).
The types of unemployment presented earlier in this text proposed that this occurrence (unemployment, in particular) is existing due to several factors that may affect the balance between a person and a job. Wages and salaries (may also include benefits and insurance) are big contributors to the cycle of how the employment rate of a certain country is rising or falling. With regards to the news article about the unemployment rate in Spain decreased in a span of three months, officials stated that the political crisis might give something to induce or reduce the unemployment rate in the said country (Mylonas, 2012). These political issues may involve unequal views or perspectives between the employer and the employee, about which the former one may not be abiding with the laws governing the welfare and the safety of the employee, resulting to a case of voluntary unemployment. Sometimes, the employee takes advantage of the laws that govern him or her and the benefits that he or she demands from the employer which makes the rights of the employer fall. Now, considering the positive outlook of politics to the movement of the unemployment, with accordance to the New York Times, in their article published this year, 2018, stated that the United States of America actually added or produced 250,000 jobs last October, with the unemployment rate of the said country plummeting to 3.7% (Fairclough ; Wodak, 1997).
Political analysts, as well as economical analysts see this as a big jump or progress since the country experienced this numbers again this year since the year 1969, also citing President Donald Trump’s strategy with regards to the economy as a highlight why this gave hope in solving unemployment which was a big problem during the 1970s. It was also stated in the same article that the number of wages that were given in exchange for the labour also experienced an increase, and also a first since the year 1969. From this point on, it is safe to assume that more and more people will want to practice their capabilities in order to start a job since wages were increased. It is then safe to conclude that wages and salaries indeed give a significant effect when it comes to solving the problem in unemployment, that the news of increased wages may also attract more people to start taking jobs (Gamson, 2001).
Another factor that may be considered when talking about the unemployment rates in a certain region is based from the economic status of the region itself, which results in the formation of a type of unemployment called the Demand Deficient Unemployment. Economic imbalances such as recession may result from companies to do these following things: a) decrease wages for the employees. b) decrease the number of employees that they have. c) limit the jobs that a company has to offer, to which all of these choices, regardless if all or one, is performed for one reason only: to meet the demands of the market. This results than to immigration of some of their citizens to other places, whether a town, a city or even a country. This is evident in some Asian countries like Indonesia, the Philippines, Cambodia, Laos, and some others. In the Philippines, for example, with accordance to the Philippine Statistics Authority, the unemployment rate of the said country for this year is 5.3%, a decrease from last year’s result of 6.6% (Mylonas ; Kobatsiaris, 2013). However, still with accordance to the same agency, and looking back at the year 2017, it was released that the population of the said country was 105 million, and out of that, roughly 3 million people are working outside the country.
Furthermore, not all the 3 million people are working, so these people are adding up to the number of unemployed ratings in the said country. This shows that unemployment poses many problems, not just economically, but also socially, physically and emotionally, not to mention the dangers of exploring an unfamiliar place in order to search for greener pasture and endless opportunities that hope to make their lives better. Indeed, it cannot be denied that basing from the data that was presented beforehand in this text, as well as the facts that was also presented, unemployment is a serious issue in the modern economic world that needs to be treated at once, since the balance between the work and the workforce is at stake. To every problem, there must be at least one solution, and fortunately, the government sees this phenomenon as a threat to the nation, both economically and other aspects as well such as physically, emotionally, socially and the like.
3.0. The rationale for the Policy chosen by the government to overcome the challenges
Specific policies were given notice of, henceforth possessing a vision on how the unemployment problem should be solved. Since unemployment is a problem full of extremes, the best solution is actually to reduce those extremes. One possible solution that the government proposed as a policy is reducing cyclical unemployment. Economists, well most of them, proposed that an increase in cyclical unemployment, or real wage unemployment, is caused by an aggregate demand decrement. If wages and other input prices, of which were mentioned as one of the factors affecting unemployment, are dubbed as “sticky,” the economic world can undergo relatively long periods of this type of unemployment (cyclical), and policies will be needed to reduce the numbers of the said phenomenon.
Government and stabilisation policies which are intended actually to maintain full employment and stabilizing reasonably the price level can be proposed and used, for example, monetary policies and expansionary fiscal policies can be used (Philo, 1993). A trade-off between the reduction of unemployment and the increment in the price level. For example, if a certain economy is experiencing full employment, expansionary policies will then take place by simply putting the price level at the state of increasing and leaving the output unchanged (Schultz, 1998). However, even though the government’s use of policies for stabilisation, cyclical movements in the levels of the prices and number of unemployment can still be observed throughout. These fluctuations occur because it is difficult to know how much to change some variables such as the amount of money the government uses when using this stabilisation policy and also because it is difficult to use the stabilisation policy in a manner of time.
Another way or another policy is the reducing of structural unemployment. Structural unemployment has been defined as the type of unemployment to which the workforce cannot perform the work. Some policy suggestions and recommendations for the reduction of structural unemployment include the providing of training programs by the government to the so-called structurally unemployed, paying of subsidies to firms and employers that provide training to labourers who have been displaced, aiding of structurally unemployed to be cast or to be assigned to areas where work is abundant, and convincing and helping workers who are seen as capable to actually resume or continue their schooling (Feher & Fairclough, 2013).
Concerning the last phrase of the paragraph beforehand, which mentioned the urging of prospective labourers to gather more knowledge by continuing their schooling, another policy has been proposed, which is the reducing of Frictional Unemployment. As it was defined earlier in the context, frictional unemployment is the type of unemployment to which a person capable of doing a job was not able to find a job suitable or not suitable for him or her after quite some time. One best example of people who are involved in this kind of unemployment is freshly graduated students from the school.
Another policy that the government use is the Fiscal policy. Fiscal policy can aid in the decrement of unemployment levels by aiding to the increment of aggregate demand and the economic growth rate. The government will then need to push expansionary fiscal policy; which involves tax cutting and an increase in government spending. Lowering the taxes may increase disposable income and therefore aids to the increment of the consumption which then leads to a higher level of aggregate demand, or AD for short (Ceka, 2013).
With the aggregate demand experiencing an increase, there will also be an increase in Real Gross Domestic Product or GDP as a response as long as the economy possesses spare capacity in order to meet the demand (Kriesi & Grande, 2014). If firms and companies can produce more, there will also be an increment of demand for workers and labourers and therefore resulting in lowering a type of unemployment, which is the demand-deficient unemployment. Also, with higher levels of aggregate demand and stable economic growth, fewer firms and fewer companies will go bankrupt or means of closing down, which then results in a decrease in job losses.
Keynes was an active advocate of this expansionary fiscal policy during a prolonged recession during his time (Fraser, 1990). He proposed that in a phenomenon like a recession, resources, both labour and the capital, experienced being idle. Since then, as a response, the government should be intervening and be able to create additional demand in order for the reduction of unemployment to occur.
Another policy that may be involved in the reduction of unemployment is the monetary policy. This policy would be involving cutting the interest rates. The results of lower rates impose a decrement of the borrowing cost and encouraging people to invest and spend money. This then would increase the aggregate demand and should also be of aid to the increment of the Gross Domestic Product and aims for the reduction of the demand deficient unemployment. Also, the lowering of interest rates will then lead to the reduction of exchange rates and make the exports more competitive in the business world (Grande & Kriesi, 2014). However, as good as the policy is, there are some cases to which the lower interest rates may be ineffective in the boosting of the demand. In case that this happens, Central Banks of each nation or region experiencing this phenomenon may go or actually resort to a method of Quantitative easing, with an attempt for the increment of the supply of money and boost aggregate demand, which then may result to lowering the unemployment rate (Kaldor & Selchow, 2012).
In conclusion, unemployment is a serious problem that must be dealt with accordingly. As it was discussed earlier in this context, this phenomenon is co-occurring in five different types, all of which has certain factors to which it attributes to the increase of the problem. Fortunately, government policies were proposed in order to fight this phenomenon and by actually balancing the demand between the labour force and the jobs available. Several policies were introduced in this context, all of which aims to lower the levels of unemployment in a certain country or region. The news article with regards to the lowering of these levels in Spain is the best example of the country creating solutions to which can solve the problem once and for all. Like most policies mentioned already, the policy recommends for the reduction of frictional unemployment must include establishing a computerized or automated job bank around the nation that would provide job seekers and prospective employers with better and sufficient information about the job (for the job seekers) and the person looking for the job (for the employers and firms) and implementing programs of apprenticeship similar to those implemented and being practiced in other countries such as Germany and Austria.