Unemployment Essay: Causes And Solutions.

Explain why there is unemployment in your country of birth? 

Definition and measurement of unemployment

Unemployment is the number of individuals who are searching for the job currently but they do not have a job. However, children and inmates are excluded since not every individual without the job is classified as unemployed. Actually, economists explain unemployment as people in the working-age bracket but they do not have the job currently and they are available for the job at current wage rates (Collins, 2015).

Unemployment is not only an economic issue but also a very serious social problem in the countries that are developing such as Vietnam. Waste of resources is synonymous with unemployment since labor is one of the inputs in process of production. Moreover, lack of job results to poverty and lack of equality in economies’ development. The healthy measurements of an economy can be done through unemployment. Mathematically, unemployment can be expressed as the workers who are not employed divided by labor force multiplied by hundred i.e. it is expressed in percentage.

Causes of unemployment are due to different factors such as sudden changes in technology, recession, inflation, disability, unstable business cycles, and changes in tastes and alteration in climatic conditions. The two major categories of unemployment are disequilibrium and equilibrium unemployment. The frictional unemployment is unemployment due to the friction of the economy naturally and it is represented by people who change job with skills that can be transferred. For instance, a job seeker may not have the skills to look for jobs in the company that may require his skills. Due to this, the person may not engage in other work for the time being as he waits for a better job (Modigliani, 2016).

There is structural unemployment which is caused by changes in economic structure that makes some jobs to disappear and consequently create other jobs that unemployed are not qualifying. For instance, evolution in computer technology may have eliminated some jobs at the same time creating new jobs.

Another cause of unemployment is when real wages are forced above the market clearing level. This causes a type of unemployment called real wage unemployment. Another cause of unemployment is an economic contraction. For example, economic recession leads too many firms closing down and others become bankrupt.

Another cause of unemployment is the seasonal trend. For example, skiing instructors teach people how to skis in winter but when the snow is gone they are out of job. Another cause of unemployment is due to disabilities or other factors that cannot be corrected. For example, blind or mentally challenged people may need employment but they cannot perform even when given an opportunity (Hagen, 2012).

Causes of unemployment

Unemployment can be caused by lack of reflection of the workers in the official unemployment statistics because of the way they are compiled. For example, discouraged workers may fail to search job because of long term search of the job without getting one. This leads to loss of motivation and morale. Unemployment can be caused by poverty trap due to lack of financial disincentives caused by taxation and government benefits systems. When lack of employment rate is equal to natural unemployment then there is the existence of full employment.

As a developing country, Vietnam had to recover from scores of war in the last thirty-five years. In the year 1986, the government of Vietnam introduced “Doi moi’ (renovation) which has impacted its economy positively. Also, the Vietnam governance has increased economic liberty by changing its policy. Since the year 1986, the economy of Vietnam has been changed from centrally planned to market economy. Gradually and partially since then, Vietnam has reduced poverty, raised living standards of its citizen under stable political foundation. Despite this, Vietnam is still facing a high rate of unemployment more so underemployment (Flaim, 2013).

Factors such as population increase, national economy, inflation and monetary have been very key in contributing to Vietnam unemployment. Actually, unemployment in Vietnam is not that critical. However, the youth unemployment is two-thirds of the total unemployment. The economic development and the rich and the poor gap are causing education to be more expensive. This implies that there are a good number of youths who cannot afford education. As a result, the youths lack the skills and knowledge to enter the labor market.

Another cause of unemployment in Vietnam is a poor education system and pieces of training. Many degree holders work in labor markets where they do not apply the skills and knowledge acquired in university. This implies that people who do not have the formal education they may not get jobs. Actually every year more than 1.4 million people enter the job market but around thirty percent of the people who have skilled training. Therefore a large percentage of people do not have the right skills that are in high demand.

To measure unemployment rate, there is need to identify who is in the labor force. The employed and unemployed individual make up the labor force. To examine the labor force, there is a need to take practical judgment like how much paid work someone needs to engage in so that he can be considered employee and counting the number of people having a job (Frankel & Stock, 2012).

Unemployment in Vietnam

Assuming that 12 million people are employed and 0.8 million people are unemployed, the labor force size is calculated as the sum of the two groups. In this case, the labor force is 12 million people plus 0.8 million people which totals to 12.8. The unemployment rate is a percentage of the labor force, which implies that it is 0.8 divided by 12.8 then the quotient is multiplied by 100 which give 6.25 as the unemployment rate. Cyclical factors affect the number of unemployed people. These factors are an economic downturn and structural economic factors. Also, unemployment is affected by labor force changes.

Underemployment is the situation when all the skills, education or availability to work are not used in jobs. The two categories of underemployment are visible and invisible. Workers who are work for fewer hours than is expected in their field are described to as underemployment. Actually, they are able and willing for extra time but they can’t get this kind of full-time job. Just to meet their basic needs they have to work two part-time jobs.

Invisible underemployment involves workers in a full-time job but they do not use all their skills. It is almost impossible to measure this kind of underemployment. It needs a detailed survey to compare employee against job requirements. Another type of underemployment is statistical or no man’s land. This means that they are not categorized as unemployed because they do not have a job (De Jong & Madamba, 2011).

There are unemployment disparities in different regions in Australia. Over the past twenty years, the relationship has been held up. The variation of unemployment has been due to significant changes in structure in economy and change in rates of growth in all industries. During the boom of resources, the regional unemployment deviation has narrowed and as the national unemployment rate has fallen.

Australia can implement two main policies to reduce unemployment. These two policies are demand size policies and supply-side policies. The demand size policy will reduce unemployment caused by the economic recession while the supply size policy will minimize unemployment caused by the natural unemployment rate (De Anda, 2014).

Other policies include a monetary policy which reduces the interest rate to boost aggregate demand. Fiscal policy will reduce taxation to increase aggregate demand. Also, Educational and training policies will minimize structural unemployment. Subsidies that are a geographical need to be put in place to encourage firms to invest in depressed areas. Another useful policy is to reduce minimum wage to reduce real wage unemployment (Jackman, Pissarides & Savouri, 2010).

Unemployment in Australia

  Education and pieces of training give lasting new skills to unemployed people. These skills assist them to find a job in developing industries. For example, the unemployed steelworkers are retrained to have information technology skills. However, the people who are not employed may not be willing to learn new skills and thus it might take a long time for Australia to eradicate unemployment.

Another policy is reducing trade union powers. When trade unions bargain for wages that is beyond the market level they cause real wage unemployment. This will serve better to solve real wage unemployment. Additionally, employment subsidies policy should be put in place in Australia. Firms that take a long time break should be given tax breaks. This assists such companies to gain new confidence and be able to conduct job pieces of training. However, it might be very costly and consequentially encourage firms to replace current employees with long term unemployment breaks so that they can benefit from tax breaks (Bean, 2009).

Conclusion

Benefits requirement for the sticker is another policy that Vietnam can embark to reduce unemployment. Unemployed should embrace risk losing benefits through pro-activeness of the government. After a given period, the government should assure the unemployed jobs such as cleaning the streets in the public sector. However, this might be a financial burden to the government since it will end up employing many people in the unproductive sector (Spangenberg, 2014).

Lastly, the policy of improving geographical mobility should be implemented. Usually, people who are not employed tend to be in large number in certain regions. This geographical unemployment can be tamed by giving firms that are situated in areas that are depressed tax breaks. The government can provide an alternative through giving the unemployed assistance in terms of finance especially those who move to places with high employment.

References

Bean, C. R. (2009). The role of demand-management policies in reducing unemployment. Unemployment policy: Government options for the labor market, 83-111.

Collins, N. (2015). Economic reform and unemployment in Vietnam. In Unemployment in Asia       (pp. 192-209). Routledge.

De Anda, R. M. (2014). Unemployment and underemployment among Mexican-origin workers. Hispanic Journal of Behavioral Sciences, 16(2), 163-175.

De Jong, G. F., & Madamba, A. B. (2011). A double disadvantage? A minority group, immigrant status, and underemployment in the United States. Social Science Quarterly, 82(1), 117- 130.

Flaim, P. O. (2013). Discouraged workers and changes in unemployment. Monthly Lab. Rev., 96, 8.

Frankel, L. R., & Stock, J. S. (2012). On the sample survey of unemployment. Journal of the American Statistical Association, 37(217), 77-80.

Hagen, J. M. (2012). Causes and consequences of food retailing innovation in developing countries: supermarkets in Vietnam. New York, USA, Cornell University, Department of Applied Economics and Management.

Jackman, R., Pissarides, C., & Savouri, S. (2010). Labor market policies and unemployment in the OECD. Economic policy, 5(11), 449-490.

Modigliani, F. (2016). The shameful rate of unemployment in the EMS: causes and cures. De Economist, 144(3), 363-396.

 Spangenberg, J. H. (2014). Reconciling sustainability and growth: criteria, indicators, policies. Sustainable development, 12(2), 74-86.