Discuss about the Macroeconomics for Youth Unemployment in the UK.
The present report examines the impact of increasing youth unemployment on economic growth of the UK as per the data provided in the case study.
Relative importance of private consumption and net exports on UK's economic recovery in 2011
As depicted from the data, the real GDP (Gross Domestic Product) growth rate of the UK shows a sudden decrease from the period of 2007-2010 but shows some recovery signs in the year 2011. The main reason attributed to the decline in GDP growth rate of the UK is the rapid increase in the unemployment rate leading to less tax-revenue and increased benefit payments. The rapid economic recovery of the UK in 2011 is on account of increasing exports to countries outside European Union as its exports to European Union countries declined to over 45% since the period of 2007-2011 (Monaghan, 2014). The growth in export of goods particularly those of finished manufacturers are responsible for increase in net trade growth rate of the UK. The export of goods and services accounted for about 19% GDP in the year 2011. The growth in exports has contributed largely in reducing the increasing unemployment rate by creating job opportunities. In addition to this, the largest contribution to the economic recovery of the UK in year 2011 is due to decline in private consumption. The weak private consumption helped in maintaining a stable GDP growth rate. The lower government consumption also contributed significantly in recovery of GDP growth rate in the UK (Faruqee, 2013).
Impact of Youth Unemployment on Present and Future Economic Growth
The high rate of unemployment among the younger generation of a country leads to its reduced productivity and gross domestic products (GDP) as depicted from the data provided. The GDP growth rate of both the countries, that are, the UK and South Korea is largely impacted by the rising unemployment rate. It is due to less revenue realised from taxes and large investment of the government is promoting social benefits leading to reduced GDP (Gunderson and Fazio, 2014). The increase in youth unemployment has a negative effect on the present as well as future employability of the young people. Wage scaring is considered as one of the reasons for long-lasting effect on youth unemployment on economic growth. Wage scaring is defined as the long-term negative effects of unemployment on future labour market. It means that individuals with high level of unemployment are more likely to suffer from negative labour market conditions in comparison to employed individuals (Boura, 2015).
The unemployed individuals are likely to receive lower pay and reduced job opportunities in the long-term causing lower income generation for the country. Besides this, high level of youth unemployment in present causes greater mental health problems in the younger generation reducing their chances of their future personal growth and success. Employer’s often consider long-period of unemployment on CV (Curriculum Vitae) of a person to be negative and thus does not hire that person to a higher level job. Also, high period of unemployment suffered by a person also lead to degradation of skills and confidence of an individual declining the future growth possibilities. The decline in the cognitive skills such as learning and reasoning skills negatively affects the workforce productivity therefore reducing the chances of their future growth and promotion (Gunderson and Fazio, 2014). It has been demonstrated by a report of British Household Panel data that the unemployment in young adults between the age group of 18-24 had a direct impact on their future pay and mental well-being. Thus, the decline in financial and mental well-being of young generation in present due to high unemployment level will cause the aged population group of the country to become less skilled and competent. Thus, as such wage scarring have a profound impact in the present as well as future growth aspects of the economy (The jobless young Left behind, 2011).
Vocational Education as a Key to Reduce Unemployment in the UK
Vocational education is imparting skills and competencies to the younger generation people relating to a specific trade or occupation. It is also known as career or technical education through which individuals are prepared to perform their job role properly. It mainly aims to provide necessary skills in learners for preparing them to particular job role in which an individual seek to make the career. The increasing unemployment rate in the UK is mainly due to unskilled labour force that proves to be a main obstacle for them to earn employment. The business organisations are often finding it difficult to find the people with right skills for the particular job roles (Rauner and Maclean, 2008). As such, the young individuals need to prepare themselves in a way so that they can perform well in the business context through undertaking proper training. Vocational schools, in this regard, are providing highly beneficial for the young people as they provide them the necessary training for their all-round development. Vocational schools provide training sessions aiming at developing interpersonal skills of an individual for increasing the probability of achieving success in the professional field (Speckesser, 2015).
Vocational schools also provide technical education to the learners so that they are able to develop knowledge regarding the various new technologies used by the business organisations in their operational processes. This increases the chances of their hiring in technology companies that encompasses the use of high technologies in developing their products and services. The UK government is presently emphasising on developing vocational schools for improving young generation skills and making them more competent to become employed (Rauner and Maclean, 2008). This is due to the existence of a direct link between the vocational training and low youth unemployment. The government is working in collaboration with the schools and colleges of the country as well to prepare students in such a way that there are able to effectively meet the industry standards. Thus, government is implementing plans and policies to impart vocational training to the younger generation right from the academic curriculum. In addition to this, the UK government is also aiming to develop vocational schools that are specially meant for providing training to the learners seeking for employment. The government is planning to provide apprenticeship opportunities to each youth of the country for developing necessary skills in them that can provide them employment in future context (Speckesser, 2015).
It can be summarised from the overall discussion that rising unemployment level in the UK is having a negative impact on its economic growth and development.
Boura, S. 2015. The Social Impact of the Crisis on Youth Unemployment: Comparative Study Spain and Greece. Anchor Academic Publishing (aap_verlag).
Faruqee, H. 2013. Global Rebalancing: A Roadmap for Economic Recovery. International Monetary Fund.
Gunderson, M. and Fazio, F. 2014. Tackling Youth Unemployment. Cambridge Scholars Publishing.
Monaghan, A. 2014. Seven things you need to know about the UK economy. Retrieved October 11, 2016, from https://www.theguardian.com/business/economics-blog/2014/apr/24/uk-economy-seven-things-need-to-know-ons-g7
Rauner, F. and Maclean, R. 2008. Handbook of Technical and Vocational Education and Training Research. Springer Science & Business Media.
Speckesser, S. 2015. Work experience key to improving skills and reducing youth unemployment. [Retrieved October 11, 2016, from https://www.employment-studies.co.uk/news/work-experience-key-improving-skills-and-reducing-youth-unemployment
The jobless young Left behind. 2011. Retrieved October 11, 2016, from https://www.economist.com/node/21528614