AS Unit 5 – State of Global Unemployment

In Unit 5 of the Cambridge AS course unemployment is a significant area of study. It is also important that you are up to date with current trends worldwide. In the OECD the average unemployment rate was 7.9% whilst the eurozone area showed 11.1%. There are two main features of this unemployment – youth unemployment and those who are long-term unemployed. The graph below shows figures that range from 4.4% in Japan and 24.6% in Spain.

Youth Unemployment
This is a major problem especially for those that are unskilled and looking for employment in blue collar jobs. These countries with high youth unemployment have experienced long-term consequences, particularly for those with limited education. Brian Gaynor in the New Zealand Herald mentioned some consequences of youth unemployment from various sources. They include:

* Being unemployed young resulted in lower earnings by 8.4% – 13% in future years.
* A 1% increase in US unemployment resulted in a 6-7% decrease in the wages of college graduates.
* Youth unemployment raised the probability of unemployment in later life
* Loss of earning up to 21% at age 41 for workers who experienced unemployment in early adulthood.
* Unemployment in early 20’s affected earnings, health and job satisfaction up to two decades later.

Long-Term Unemployed

According to the OECD and since the GFC the rise in numbers who have been unemployed for over one and two years are as follows:
1 year – 1.6% to 2.9%
2 years – 0.9% to 1.5%

One of the major issues that a lot countries face is the number of baby boomers that are remaing in the workforce after 65 and the impact this will have on youth unemployment. Furthermore, it is interesting to note from the OECD that labour’s share of national income in its 34 countries has declined from 66.1% to 61.7% in the last 10 years. According to Brian Gaynor the decline in labour’s share is due to a number of factors:

* Greater productivity gains
* Increased mobility and transfer of low-skilled activities from developed to emerging countries
* Weaker trade unions – impacts bargaining powers
* Privatisation – newly privatised companies are more profitable and have fewer employees

Minimum Wage Increase?

The OECD argue against a higher minimum wage as it will increase prices. Also in the long-term firms respond by increasing productivity levels beyond the wage rise which leads to a decline in labour usage and therefore a greater emphasis on capital.

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