Unemployment is a term that nobody wants to come face to face with it. "Statistics Canada defines the unemployed as those who are without jobs and who are actively looking for and available for work" (Macroeconomics: A Problem Solving Approach; 418). Many in our country suffer from unemployment and contrary to published statistics, the unemployment rate (the number of people unemployed as a percentage of the labour force) is said to be much higher than the 12 per cent it is said to be.
While both the unemployment rate and duration of unemployment has risen for all age groups, the severity of increases in the unemployment rate has been the strongest for the youth population aged 15-24. The strongest increases in unemployment duration have been with older workers aged 45 and above. In the first case, it may be argued that younger workers are lacking either the demanded job skills, and/or the experience that employers are looking for in new workers. Alternatively, and possibly compounding this problem is the existence of the large baby boom of workers who have overwhelmed the capacity of employers for taking on significant numbers of new workers, even at the entry-level. In the second case, it can be argued that displaced older workers are finding that their skills, well established over a number of years with the same employer in the same industry, are not as marketable to other employers to the same degree, especially in other industries. The result is that while older workers as a group are less susceptible to unemployment, for those that do become unemployed, the adjustment process to finding new employment is proving to be much more difficult and longer. The decline of routine production jobs in the goods producing sector and the growth of both high-end and low-end jobs (in terms of earnings) in services is impacting older workers the hardest. Moreover many are not as geographically mobile and have less educational attainment on average than younger workers.
One type of unemployment is structural unemployment. "Structural unemployment is unemployment that is caused by structural changes in demand patterns" (Macroeconomics: A Problem Solving Approach; 419). A mismatch between the skills required in the new workforce and the skills held by the workers causes unemployment which rises at the peak of economic cycles. Ontario experiences such structural unemployment, and if our province experiences the expected economic expansion over the next few years, structural unemployment will continue to provide a challenge. Regardless of economic conditions, job seekers with appropriate skills are not available to meet the demand for workers in certain industries and for selected occupations. Often the shortage is for those with a strong platform of learning and employability skills, and specific occupational job skills with experience. It is generally recognized that the labour market and unemployment are no longer singly driven by economic cycles, but also by structural change. This structural component of unemployment, that which stems from a mismatch between the skills of job seekers with the skills required for available job vacancies, has risen substantially over time.
In general, workers in the past often remained in the same occupation and even job throughout their working lives. The explosion in information technology, globalization of economic activity and other structural forces are driving a dynamic transformation in employment, conditions of work, organization of work and how work is performed within occupational labels. This is requiring diverse and continually evolving skills for without which workers are less interchangeable, and adjustment is made often difficult. Unemployment has become as much a qualitative issue as quantitative, as skill requirements for many of the new and growing employment opportunities are often very different from declining areas of work. Yet the challenge of the structural unemployment problem is much more than that of a simple mismatch problem. All employment is not created equally, available in all areas of the province, offering the same level of income, or equally valued or pursued by workers.
The structural problem is particularly complicated on the basis of the quality and adequacy of incomes of available employment opportunities. There now exists the situation where some unemployed workers are unwilling to accept available employment positions for which they have the abilities and skills and could apply for and get, either because these jobs do not meet their income needs or expectations or both (often where the pay is below their previous wage for their last job which no longer exists). At the same time however, there is a strong demand for workers with highly marketable skills in knowledge and technical fields (who often also have a strong foundation of employability skills and educational base) which offer good incomes but where there is a shortage of available, qualified and/or experienced workers. Finally, there is the situation facing a number of unemployed workers, who have a significant amount of work experience but lack a specific in-demand marketable skill(s) or have skills made redundant from technological or organizational change. "This category of structurally unemployed is quite broad and ranges from workers entering the labour market with a general academic post-secondary credential, few technical skills and little work experience, to a draftsperson (whose employer just went out of business) with 20 years work experience though none with Computer Assisted Drafting (CAD) technology" (The Challenge of Structural Unemployment: 1).
Seasonal unemployment is unemployment which is caused by economic slowdowns related to seasonal variations. Unemployment increases in the summer and decreases in the winter for those who have jobs that are related to winter such as ski instructors. The opposite goes for those who have jobs relater to summer, unemployment increases in the winter and decreases in the summer. For obvious reasons, policies to reduce seasonal employment is severely limited.
Another major cause of unemployment relates to variations in overall economic activity resulting from business cycles (often referred to as demand-deficient unemployment). Cyclical unemployment is unemployment that is due to cyclical changes in economic activity. "A market goes though ups and downs known as business fluctuations and business cycles. When the economy is on the upswing, employment rises, and when it is on the downswing, unemployment increases" (Macroeconomics: A Problem Solving Approach; 419). Some industry sectors are particularly sensitive to cyclical changes. While structural changes are permanent, cyclical periods of recovery can and do result in a temporary resurgence in employment even in structurally declining industries. In estimating demand for future jobs and skill needs, care must be taken to differentiate between structural change and cyclical change. The degree of difficulty of adjustment in the labour market that takes place as the result of structural changes to the economy is very much affected by current cyclical economic conditions. The existence of structural changes to the labour market can be masked somewhat in strong recovery and exacerbated during recession. Both cyclical and structural factors impact unemployment and adjustment by workers. While cyclical changes often are unexpected and uncontrollable, structural changes often emerge and intensify in more predictable ways.
Frictional unemployment is unemployment which results from people moving between jobs and new workers entering the labour force. "This type of unemployment cannot be eliminated but can be reduced to some extent by providing better job opportunities and available workers, and by human resource planning so that workers will possess the skills required by the economy" (Macroeconomics: A Problem Solving Approach; 419).
The Minimum Wage Law also causes unemployment. A wage is simply a special type of price, specifically the price of labor services. The most universally accepted proposition in economics is the Law of Demand. When other things are held constant, if prices go up, buyers will buy less. Thus if labor becomes more expensive, employers will hire fewer workers. That is because some workers who would have been profitable to hire become unprofitable. A second well-accepted proposition is the Law of Supply. The higher the price suppliers receive, the more they will supply. Putting the two laws of economics together, higher wages increase the number of workers willing to work but decrease the number of workers employers will hire. Artificially raising wages by governmental order creates a surplus of labor, better known as unemployment. Despite the appearance of some recent studies to the contrary, a multitude of evidence has led most economists to accept this conclusion. The magnitude of the unemployment effects of minimum wage increases can be questioned, but the existence of those effects cannot.
A minimum wage has the greatest impact on those with low skills whose normal wage would be less than or near the legally established minimum. However, as minimum wages are raised secondary effects tend to increase the wages of workers who earn more. Most products can be produced in different ways. For example, crops can be harvested with stoop labor or by skilled workers using expensive machinery. As a result, unskilled labor often competes directly or indirectly with semiskilled and skilled labor. This explains why many regards an increase in the minimum wage as so important, even though most in favor earn far more than the minimum. Increasing the minimum wage is organized labor's attempt to price its competition out of the market.
Ever since governments really started concerning themselves with unemployment, there have been three theories as to why it exists and how to eliminate it. One theory is that the work force has grown more rapidly than the job market. "This happens due to increases in birth rate, increases in life expectancy, and increases in the percentage of the population which seeks entry to the job market (for example, the emergence of women as a major part of the labour force). The proposed solution is to create more jobs. Governments try to do this through subsidies, tax incentives, and direct job creation. We can call this the statistical theory" (Interlog; 1).
1. Changes in the requirements of the job market have made the skills of many in the market unmarketable. For example, the use of computers has eliminated many clerical jobs. The proposed solution is to educate the unemployed in the new technologies thus providing them with marketable skills. We can call this the disease theory, since it treats unemployment as a disease which can be cured or prevented through the inoculation of education.
2. The existence of a welfare society has made not working attractive. Low income earners prefer living off the public purse to working for minimum wage jobs. The proposed solution is to force people to work through programs such as workfare. We can call this the criminal theory since it treats the unemployed as deliberate slackers swindling the public out of welfare payments.
The sad reality is that while all of these theories have a small bit of truth in them, none is completely or even largely accurate and none of the proposed solutions has been particularly effective. Instead, governments have come to rely on businesses, big and small, to create those jobs. Unfortunately, fans of the disease theory have not yet abandoned it. Left wing governments adhere strongly to this theory and even right wing governments love to provide retraining programs as part of their workfare schemes. While such programs create jobs for teachers, they do little else. The problem is twofold:
1. No one can really predict the future job market with any accuracy. So it becomes impossible to know what kind of training will best increase a person's job getting ability.
2. Those people who used to answer phones, pump gas, etc are now expected to get technology training. Unfortunately, that training tends to be end user education for software like spreadsheets and word processors. The market for such people is limited, possibly nonexistent. While many people use these tools, knowledge of the tool is not their primary job skill. The technology market needs people with programming skills, knowledge of communications software and hardware, interface design skills, and similar talents. The sad truth is that today's marketplace requires people with certain innate talents and a lot of people simply don't have them. It makes no sense to believe that all those people who once performed useful, though menial, jobs can now suddenly become white collar workers. They have neither the ability nor the inclination.
The criminal theory is probably most popular in North America these days. But it, too, is clearly a failure. Workfare systems have been a disaster. While they can lead to apparent statistical improvement, they have done so largely by moving people into worthless retraining programs or by giving people make work jobs. Worse, in some cases workfare has been used to displace the currently employed so that cheaper workfare labour can be hired. This provides no net change in unemployment statistics and reduces the net wealth of the working population.
I feel that it is both necessary and morally right that society, through government, provide some income support for basic necessities to those adults unable to find employment (unemployment checks). Yet there is a growing recognition that any effective strategy for reducing joblessness will have to depend more on active measures like training and skill development which is relevant to the changing and growing skill requirements of available employment opportunities. Increasing equality of opportunity for knowledge and skills gets at the root of a large part of the structural unemployment problem. Training and education is not and cannot be the answer for all those currently on income supports but who are able and want to work. But it can be a significant part of the larger range of active measures like work experience, counseling and job search assistance, that actively partners with employers.
It is also my belief that those who are unemployed due to structural and technological unemployment find better methods of finding a job even if it takes a few years in going back to school or learning new programs at training sessions. I think if more people did that instead of sulking about not being able to find job then they would have a much easier time finding one. Then and only then can portions of the unemployment rate drop to lower levels.
James, Elijah M. "Macroeconomics: A Problem-Solving Approach". Pg. 418-425. Scarborough: Prentice
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