Government Responses to Unemployment
The Great Depression served as a “feeding ground” for unemployment in the U.S as it was at its highest in 1933 at 24.9%. Many businesses began to fail because of this. Even if they had a healthy economy there should always be a normal rate. This made it hard for companies to expand being that they couldn’t find many good workers (Amadeo,2018).
Unemployment in Germany was a disaster for Germany as it continued to increase drastically over the years. In 1928 the unemployment rate in Germany was 8.4%. By 1932 it reached a high of 33%. (Lambert, 2018).
How it works
The 1980’s is when unemployment first started to show in South Africa with the low rate of 9.2%. As the years went by though this percentage only increased. By 2002, the rate of unemployment in South Africa was 27.8%. From here on it stayed at an average rate of 20% never reaching anything below. (Knoema, 2017).
Theoretical/ Conceptual Background:
Some theories associated with unemployment include Karl Marx Theory of Surplus Value. This theory states that human labour is the key source of economic value (Bhutia, 2016). Another theory associated with unemployment is the Keynesian Theory. This theory states that the level of employment is dependent on national income and output. The demand of goods affects the national income which then affects the national output. (Natisha, n.d.). There are multiple types of unemployment, one is Classical Unemployment. This is when wages become too high for the market wage, causing the availability of jobs to decrease. (Pettinger, 2017). Another form of unemployment is Cyclical Unemployment This is when someone loses their job because of aggregate demand, (Economics Online, N/A). Employment and Unemployment monthly in states, countries, metropolitan areas, and cities of 25,000 or more. (Bureau of Labor and Statistics, 2015). This is measured using this equation: Unemployed workers/Total Labor force x 100 = Unemployment rate (Frank, 2018).
Recent Developments: One of the most recent events in the world of unemployment is people between the ages of 16-24 being unemployed as of November 2018. The rate for Youth Unemployment has been increasing over the year up until now with a rate of 8.1%. (Statista, 2018). Another major event that has happened is when unemployment fell to its lowest since 1969 with a percentage of 3.9 (Kitroeff, 2018).
Thesis: This paper will address government’s responses to unemployment by examining cases in the Germany, South Africa, and the U.S.
Government Responses to Unemployment in The United States
Unemployment: The unemployment rate in the U.S unemployment rate now is at a low percentage of 4.0%. It has not always been this way (Trading Economics, 2018). In the early 1930’s unemployment was one of the leading factors in The Great Depression. The rate averaged at 5.77% in 1948 until 2018 (Trading Economics, 2018). Not all U.S counties have benefited equally from job growth in the recent years. In other U.S counties unemployment rates remain higher than nationwide rates (Stebbins, 2018). The rates in the U.S have changed ever since. Low unemployment is not always good, If the rate is too low the economy will be considered overheated and inflation becomes a major problem (Amadeo, 2018).
Driving Factors: 6 million people who are unemployed have lost their jobs to one of the leading factors in unemployment, Business Restructuring. Business restructuring is caused by “Creative Destruction” in order to increase work and economic efficiency and eliminate waste through business restructuring, relocations, mergers, and offshoring(Paytas,2012). Another driving factor is skill gaps. Skill Gaps: Skill gaps are one of the most common reasons for unemployment. 3.7 million people only have high school education and another 2.9 million have even lower education. (Paytas,2012). The largest part of the economy is creating fewer low skill jobs. (Paytas,2012).
Government Response: The government reduces unemployment by boosting economic growth (Amadeo, 2018). The most common method to boost economic growth is expansionary monetary policy. This is when the Federal Reserve changes the monetary policy by reducing the funds rate. (Amadeo, 2018). The government is also looking into Monetary Policy. Monetary policy is the management of money supply and interest rate and is used by the government of a country to achieve economic objective such as inflation, growth, and consumption. (EconomicTimes, n.d.).
Case #2 Government Responses to Unemployment in Germany
Unemployment: The unemployment rate in Germany as of 2018 is 5.2%. In 2005 Germany’s unemployment rate was at its highest with a rate of 11.7%. Statistics show that most unemployment is shown amongst the youth.In 2014 330,000 young people between the ages of 15 to 24 were unemployed. (Destatis, 2018)
Driving Factors: Multiple jobs require a certain skill set (Dettmer, 2013). With highly a highly specialized industrial society, unskilled work has become rare (Dettmer, 2013). More than 1.2 million have difficulties finding jobs because they don’t have vocational training (Dettmer, 2013). There are 42 million, with this those with poor qualifications and the long-term unemployed, especially older workers, have fewer prospects of finding a job (Dettmer, 2013)
Government Response: One way the German government does in an attempt to limit unemployment is by encouraging businesses to reduce hours rather than fire the employees (Taylor, 2014). Programs related to encouraging businesses to this have existed in past recessions and have not shown a particular effect towards mitigating unemployment in the most recent recession(Taylor, 2014). The German government also provides unemployment insurance as well as many other countries.
Government Responses to Unemployment in South Africa
Unemployment: The unemployment rate in South Africa currently is 27.5% (Trading Economics, 2018). They have the highest unemployment rate at the moment.The expanded definition of unemployment including those who stopped looking for work rose to 37.3% (Moya, 2018).
Driving Factors: Unemployment increases progressively with decreased educational levels (GCIS, n.d.). Education systems are not are not producing the skills for the labour market (GCIS, n.d.). Some studies show that the deliberate exclusion of black people from education systems exclude them from the opportunity to take part in skilled occupations (GCIS, n.d.). Another factor is the amount of people enter the working age compared to the amount of jobs available in the labour market (GCIS, n.d.).
Government Responses: As part of building a legacy the DPSA would explore perspectives on Youth Development and public services to promote it as a career choice (Masinga, 2018). The Formal Central Graduate Recruitment would strengthen the “talent pipeline” for the Public Service’s future capacity especially in scarce occupations (Masinga, 2018). They will also do this in critical areas of service delivery such as technical skills and specialist professions. (Masinga, 2018). They will provide the best practice on existing graduate plans in the public service. (Masinga, 2018). As well as various beneficiaries of graduate programmes in the public service (Masinga, 2018).
Local Perspectives: Imogen Black experienced trouble finding a job because she was treated as an “annoying anomaly that didn’t fit nicely into the boxes on the forms” (Black, 2010). She believed that the starting of benefits led to delays in the process of finding a job (Black, 2010). This left her unemployed for months until she was actually able to find one. In her case the government does very little in actually trying to get people jobs.
National Perspectives: Nimsudo thinks that “the system of claiming separately for jobseeker’s allowance and house benefit is ridiculous” (Nimsudo, 2010). Nimsudo was unemployed because of his lack of skill in his specific employment choice. The government lacks providing certain education for the jobs now that most people have. Turminder Xuss believes that gaining experience or qualifications could lead to the opportunity to trade it up to paid employment (Xuss, 2010).
Global Perspectives: Unemployment rates all over the world have increased across the globe. Multiple countries globally experienced this trend. The U.S compared with other countries does not seem as dramatic as it looks with concrete domestic statistics. Globally countries suffer from because people feel that education and skill deficiency takeaway multiple job options. The jobs that are available for them don’t pay as much to fulfill simple necessities. This would therefore force workers to leave the job in search of a new one. Even though chances of finding a higher paying job may be severely low based off of their skill set and education.
Takeaways & My Perspective: With all the statistics gathered it is clear that one pattern or trend that is shown amongst all of the cases displayed. One trend or pattern that is shown is that the biggest driving factor in all of these cases is the lack of skill and education given to citizens in a country. Another trend shown over time is the decrease in unemployment after the Great Recession and the Great Depression.
Solution(s): Government agencies like the Department of Higher Education in South Africa, Federal Ministry of Education and Research in Germany, and the Department of Education would provide the right education to all citizens. This would include skills necessary for the job industry now instead of just basic knowledge. Schools should provide electives dedicated to specific job careers. A problem that may rise is the ability to fund these classes in public schools. In order to solve this a small percentage of taxes collected by the government would dedicated funding any materials needed for these classes in public schools (Computers, Robotics, Cars, etc…).
Significance: This issue correlates to other issues involving employment such as poverty. Poverty is a problem in multiple countries such as Haiti, Mozambique, and Madagascar (Wall St, 2012). This would have a major effect on not only the citizens of a country but the environment as well. People living in the streets would only result in trash being left on the floor, thus causing multiple areas to look less presentable than others. With unemployment being one of its major driving factors, a decrease in unemployment will result in a dramatic decrease in poverty in any given area.