One of the major effects of recession is the increased unemployment. Unemployment is a global situation and affects even the developed nations such as United States of America and Europe. According to the United States Department of Labor, unemployment rate dropped to 9% as of January 2011 as the economy generated a mere 36,000 jobs (Anonymous, 2011). The financial crisis has compounded the already big problem of unemployment. Recession has resulted into the decrease of new job opportunities, increased layoffs especially in the public sector and very high taxes especially on companies. The Bureau of Labor Statistics reports that more than a half a million unemployed workers gave up looking for jobs following the economic recession because the chances of getting new jobs are minimal. This has led to an increased rate of unemployment and hopelessness among the unemployed (Anonymous, 2011).
The greatest problem is that unemployed workers are discouraged and are no longer looking for job opportunities and this makes their chances of returning into the job market very slim. The government does not classify as unemployed, the people who quit job searching. Therefore, despite an estimated 5 million Americans not part of the workforce, the government does not consider them as unemployed because they have simply given up looking for work (Anonymous, 2011). This calls for the United States government to find out the cause of hopelessness among the unemployed so that it can find a solution as soon as possible to put such Americans back to work. This paper aims at finding out if location and duration of the unemployment have an effect on the return of the unemployed persons to the job market. Additionally, the paper will examine if the unemployment benefits influence the unemployed workers search for jobs by encouraging the unemployed to stay home and not look for new job opportunities.
Introduction
United States and many other countries around the world exempt potential workers every year from their labor force. Many such cases are because of employee layoffs or discharges, resignations and lack of persistence in job seeking. Economic changes due to inflation and/or recession, unpredicted business cycles, abrupt changes in technology, discriminatory factors in the work place, alterations in employee tastes, opinion of the employee and values they uphold are the major causes of such reasons. Recession is perhaps the biggest cause of unemployment in the United States and in other parts of the world today (Anonymous, 2011).
In most cases, those seeking for jobs are misinformed on the available job vacancies they can take up and thus end up missing many employment opportunities. Consequently, uninformed job seekers end up spending long periods looking for jobs, which increases unemployment. Unfortunately, such job seekers become demoralized and they give up looking for jobs even if there are prospects of new job openings. Therefore, al the aforementioned factors lead to unnecessarily long job searching coupled with reduce chances of potential unemployed individuals going back to labor market (Froyen, 1998, p.71).
The financial crisis has hit some sectors and groups more severely relatively to others. The hardest hit sectors are financial, manufacturing and the construction industries. The most affected demographic groups are youth, low- skilled persons, and men. This has led to the need of unemployed individuals to relocate to areas that the global financial crisis is likely to affect. The efficiency and speed of relocating to new job markets depend on factors such as wage flexibility across sectors and the country as a whole, ability to remodel current skills to meet different demands and capital cost of selling property in order to move to greener pastures (Blanchflower, & Oswald, 2004, p. 362). Rural areas in almost all states in the United states have very low unemployment rates, but the unemployed are either unwilling to relocate due to the prestigious of living in urban areas or those willing to relocate do not have the funds required to relocate to another state (Anonymous, 2011).
I personally gave up looking for work because most companies rarely send feedback to job seekers to confirm receiving job applications particularly when applying online. In addition, when employment agencies advertise for jobs, their aim is to develop a database of job seekers and their skills. They can later give to the companies when opportunities arise. In some cases, the companies advertise and conduct interviews for an already filled position. The interviews, therefore serve as a mere formality as the person, who by virtue of knowing the top managers of the company, secures the job. Favoritism is also rife as hiring is rarely done on merit but on “who you know” within the company. Besides, the sluggish growth in employment opportunities coupled with slow rate of economic recovery following the recession means that the competition for the available few opportunities is high. My strong preference for other activities like opening a small scale business or exploiting the numerous online business opportunities rather than formal employment makes me relinquish job search altogether.
Definition of Unemployment
According to the International Labor Organization, unemployment is the situation where an individual does not have a job and he/she is actively looking for work within the past four weeks without any breakthrough Percentage of the number of people currently working measures the unemployment level of any country or state. That is, by dividing the number of unemployed with that of the employed people. The level of unemployment in a country is an indicator of the economic status of that country.
Causes of Unemployment
Several factors presumably contribute to unemployment. These include changes in technology , recession, willingness to work , employee values ,inflation, ability to look for employment, discrimination factors, change in business cycles, disability and employee perception. All these factors lead to the different types of unemployment as aforementioned
Inflation is a situation when any economy faces a sharp increase in prices of products and services compared to those of other economies. Inflation has adverse effects on labor productivity and labor markets resulting into reduced incomes, loss of jobs, and thus an increase in the unemployment rate (Froyen, 1998, p. 82). It also affects capital and hinders productive capital development leading to huge business losses. The government, through its labor laws, levy taxes, business licensing, price controls and wage increments, contributes to inflation (Blanchflower, & Oswald, 2004, p.369)
Welfare payments increase unemployment because jobless people are no longer willing to look for new jobs or work. These payments only target the unemployed creating a substitution effect, where the employed people work less or are less willing to work because of the increase in welfare payments for the unemployed. Consequently, the unemployed become dependent on these grants and fail to look for jobs contributing to unemployment. Changes in technology result into job layoffs as machines take over positions previously held by humans. This leads to redundancy of skills and an inability to return to the job market (Anonymous, 2011). Technological advances increase productivity as they offer new and less costly methods of producing products and may result to production of new products. Technological changes often result into decrease in demand for labor markets. This contributes to unemployment.
Employee values may lead to some people voluntarily leaving their jobs. This occurs mostly when employees feel that the working environment is not conducive which results in job dissatisfaction (Froyen, 1998, p. 87). Most companies do not endeavor to improve employee performance. As a result, the work environment becomes unfavorable to the employees, which diminishes the employees’ dedication and desire to work leading to job dissatisfaction that compels them to leave their jobs.
Discrimination factors include race, age, level of education and experience. Non-citizens of a country find it hard to secure employment opportunities due to their race, ethnic tribe, religion, and caste. Young inexperienced people find it more difficult to find good jobs unlike older and experienced people. People with high levels of education are more likely to get a job than those who did not go to school or those who dropped out of school (Anonymous, 2011). Employment discrimination makes it increasingly difficult for the discriminated people to secure decent jobs further contributing to unemployment.
Unemployment Types
Unemployment can be classified into two broad groups: voluntary and involuntary unemployment. Voluntary unemployment occurs when a person makes a decision to remain unemployed for example, refuse to take up a job due to its low wages. Involuntary unemployment occurs when socio-economic factors result into people losing their jobs. There are various types of employment. These include structural, frictional, cyclical, and classical types of unemployment. For example, a recession may lead to people being fired. In this regard, “frictional unemployment is voluntary as it is a reflection of an individual’s work search behavior while structural, cyclical, and classical unemployment on the other hand, are involuntary” (Froyen, 1998, p. 89).
Structural unemployment arises when there is a disparity between demand and supply of workers with the necessary skillfulness in the job market. Under structural unemployment, the skills and training of the labor force fail to meet the employer’s needs. Disruptive globalization and technologies are the major cause this unemployment. If structural unemployment extends over long periods, the unemployed people loss hope and stop looking for jobs and this eventually leads to their job seeking skills becoming obsolete. This makes their re-entry into the job market even more difficult. Automation of the production process is another cause of structural unemployment as it often results into lay-offs while only few skilled labor forces remain. Another important cause of structural unemployment is the shifts in opportunities in the different sectors of the economy and the location of the employment opportunities (Meyer & David, 1983, p. 93). The United States economy experiences the creation of more jobs in one sector, which, however, requires professional skills and can only employ few people. Additionally, the jobs may be concentrated in a particular state and thus, serves no good for the unemployed from other states leading to structural unemployment. Structural unemployment is largely involuntary although it may indicate the decisions made by the unemployed in the past.
Frictional unemployment takes place when there is a discrepancy on the wages and the equivalent amount of time and effort requisite for the new job and as a result people have to make a decision whether to work or not. It occurs when people are transitioning from one job to a better work. A mismatch between employer demands and factors related to employee preferences, remuneration, location of the job, the work environment and employee skills leading to employee dissatisfaction causes this type (McLaughlin, 1991, p. 27).It is indeed the major cause of frictional unemployment. Additionally, frictional unemployment can result into a situation where fresh graduates fail to secure employment due to failure to meet the skills and experience needs of the employer. Frictional unemployment can also arise in a situation where workers wait to re-enter their jobs after a short break or vacation.
Although frictional unemployment contributes to high levels of unemployment, it can be beneficial in the sense that it provides an opportunity to the workers and employers alike to explore the most suitable options (McLaughlin, 1991, p. 15). It leads to employee growth and promotes innovation and skill development, which increases labor productivity. It also gives the workers an opportunity to search for jobs that suit their skills, tastes, and preferences.
Cyclical unemployment results from the seasonal fluctuations in unemployment rates due to short-term rise and fall in labor demand. It results due to a drop in aggregate demand of consumer products and services following financial crises. It follows that, unemployment is high during recessions due to decrease in demand of products, which makes businesses to lay-off most of its workers. During economic recoveries, the prediction is that the level of unemployment should decrease as businesses pick up and the GDP grows. However, the GDP can grow slowly leading affecting the creation of new jobs for the unemployed failing to match the increasing labor productivity.
Classical unemployment results from fixed minimum wages being higher than what the market forces have determined it to be. This results into a large number of unemployed people with very few job openings available (McLaughlin, 1991, p. 6). This phenomenon mostly occurs when the government decides to interfere in the economy to ensure better conditions for those who are unemployed (Anonymous, 2011). The government’s legislations concerning the minimum wage contribute to classical unemployment in most industries. It can also arise when labor organizations and trade unions force the company to offer higher wages leading to a decline in the demand for labor (Meyer, & David, 1983, p. 66). Classical unemployment is involuntary as extraneous forces such as the government policies and labor laws influence labor demand.
Faces of unemployment
There difference between being unemployed and unemployment is that; being unemployed is the situation where a person is prepared to work but does not have a job. Unemployment, on the other hand, is being jobless, which relates to a job loss. Unemployment has two faces, the negative, and the positive aspects. The negative aspects are those, which are problematic such as the loss of income, inability to find unemployment, depression, trouble in paying bills (Clark, & Osward, 1994, p. 649) Unemployment affects the employment sector causing the employed to feel insecure, which in turn influences their productivity. The society also feels the negative aspects of unemployment as unemployment creates economic divisions among the working and the unemployed members of the society. This increases the level of inequality, not only within metropolitan areas, but also between regions.
Unemployment keeps the pay rates very low because many people compete for the same jobs and this could be the reason why the unemployed give up on job searching (Anonymous, 2011). Unemployment also strains the federal budget as it reduces revenue collection and increases government expenditure through the unemployment benefits (Darity, & Goldsmith, 1996, p.135) Unemployed people tend to have a greater need for health services compared to the employed such as outpatient visits and use of pharmaceutical products leading to increased cost of health, which strains the government.
There are also the short-term employment options, which offer short-term solutions to unemployment, with the low pay from such jobs one still finds it hard to maintain their lifestyle as a result, many such employees end up losing their jobs. The positive aspect of unemployment is that it helps one to look ‘outside the box’. There have been successful stories that emerge after jobless situations. Unemployment causes a person begin a successful venture of something they have a passion for and enjoy doing (Froyen, 1998, p. 91). It allows a person to re-invent himself/herself and explore options that can boost his/her economic prospects (Winkelman, & Winkelman, 1998, p 12). It also offers an opportunity to the unemployed to develop their skills to meet the labor skills required in industries.
Effects of Unemployment
Unemployment has psychological effects on the unemployed, which lead to many short-term and long-term consequences. Stress is the immediate after-effect following job loss or unemployment and it contributes to decline in self-confidence and enthusiasm. Unemployment makes people unable to meet their financial and social obligations. They are unable to pay their rent or mortgage payments, which results into their conviction. This increases stress levels, which when coupled with self-esteem loss leads to depression (Froyen, 1998, p. 102). Stress has negative effects on the general health of individuals as people often neglect their health during stressful periods and in the aftermath of job loss. Unemployment is a major contributor to family problems as it causes a decline in family income that affects the welfare of the family members.
High unemployment rates means that there is no efficient deployment of resources. This creates social problems such as crime, loss of skills and people taking up jobs that are below their expertise levels. This eventually creates job dissatisfaction and thus increases unemployment in the wrong run (Anonymous, 2011). High unemployment levels can also lead to civil unrest among citizens. This results into revolutions, which end up destroying physical capital and thus reducing the few employment opportunities that were once present.
Location and unemployment
Does location determine the return of the unemployed individuals into the job market? The low level of geographical and occupational mobility of labor contributes to structural unemployment. A mismatch between the skills found within a particular geographical location and employers’ needs, contributes to the high level of unemployment. An Idaho Department of Commerce release in 2008 commented that “data collected by the Bureau of Labor showed that jobseekers were more likely to return to the job market if they moved to cities like Idaho Falls instead of looking for job opportunities in Chicago, New York and Los Angeles” (Anonymous, 2011). The cause of this is that most urban cities have been experiencing posted growing rates of unemployment. Unemployment can result into outmigration of the unemployed or dissatisfied workers from a deprived region or state to areas with plenty of employment opportunities. However, the affluent areas may force people who cannot afford rent or housing to leave these regions to less-affluent areas creating the disparities in unemployment.
In the MSN Career survey conducted in 369 metro areas in the United States in 2008, Idaho Falls had the second lowest unemployment rates with an unemployment rate of 2.4 percent. It was only nine of the cities surveyed that indicated unemployment rates below 3 percent. This study was a quantitative design. The analysis method used showed that a strong correlation existed between the city one lived in and the odds of finding a new job (Anonymous, 2011).
Conclusion
Most of the unemployed have given up looking for jobs leading to the current high rate of unemployment. Although, economic recession is largely to blame for the decline in employment opportunities, government regulatory policies also contribute to a decrease in job opportunities leading to structural unemployment. Other factors such as the unemployment benefits and discriminatory practices by the employers discourage the unemployed from searching for jobs. It is apparent that geographical location of employment and labor mobility influence the unemployed searching for jobs. Unemployment benefits increase the well-being of the unemployed, which in turn influences their job search behavior.
References
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