The Impact of Financial Crisis on the Uk Job Market Essay

The impact of the financial crisis on the UK job market and employment (2007-2009) Module: PM021-Aspects of British Culture and Society Name: JUN YU WU Student Number: 0908108 Tutor: Jeff Meadowcroft Word Count: 1,970 Contents 1. Introduction…………………………………………………………………….

.. Page 3 2. Global financial crisis (2007-2009)………………………………………Page 3 3. Influence on world job market……………………………………………Page 3-4 4.

Influence on the UK job market…………………………………………. Page 4-5 4. 1 Short-term changes……………………………………………………..

Page4-5 4. 2 Long-term changes……………………………………………………….Page 5 5. Analysis of current situation in the UK………………………………Page 5 5. 1 “British jobs for British workers”…………………………………. Page 6 5. 2 Job shortage for unskilled youths…………………………………Page 6 5.

3 Tendency of the UK job market……………………………………Page 6-7 6. Potential solutions……………………………………………………………Page 7 7. Conclusion………………………………………………………………………. Page 7 8. References………………………………………………………………………. Page 8 1. Introduction It is important to investigate the changes on UK job market which were mainly caused by the global financial crisis.

Since the global financial crisis happened in 2007, it has brought about a far reaching influence on world job market. Figures reveal that an estimated 6. 0 percent of the world’s workers were not working but looking for a job in 2008. (International Labour Organization, 2009) The situation in the UK is even worse. The latest official jobless figures showed that the number of work in the UK had risen to its highest level since 1995.

(BBC, 2009) This report will describe the impact which the financial crisis (2007-2009) has had on the UK job market and to find potential solutions to overcome this crisis.First, it will describe the background of the global financial crisis and how it has influenced on world job market. Then it will discuss short-term changes in the UK job market which were caused by the financial crisis and long-term changes over the last 30 years. The report will also analyse the current situation of employment in UK before providing some recommendations on issues, such as social security provision, where improvements are appropriate and how they can be made. 2. Global financial crisis (2007-2009) The global financial crisis started to show its effects on June 2007.It was reported that this is the worst crisis that global financial markets have experienced since the 1930s.

The crisis was caused by the collapse of the housing market in the United States. Credit in the United States and other developed countries were overly trustful of residential mortgages, commercial mortgages, credit cards, auto loans and student loans. Many securitized products had converted these debts into negative financial derivatives, in financing for leveraged buyouts and in the dangerous credit default exchange market, however the real reasons may go deeper.The high commodity and energy prices, the sub-prime mortgage crisis, contraction of the real estate market in many developed countries, and the severe global financial services shock has given rise to a massive tightening in lending and had a negative effect on most sectors of the economy and on employment (International Labour Organization, 2009) 3. Influence on world job market The global unemployment rate increased from 5. 7 per cent in 2007 to 6. 0 percent in 2008, the number of the unemployed people increased by 10.

million between 2007 and 2008, which is the largest year-on-year increase since 1998. The International Labour Organization predicted that at least 20 million jobs will have been lost by the end of 2009 due to this financial crisis, and mostly in financial services, construction, real estate, and the auto sector, which will make the world unemployment above 200 million for the first time. The amount of unemployed people worldwide could increase by more than 50 million in 2009.

(International Labour Organization, 2009) The official statistics show that the U. S. unemployment rate was 4. % in December 2007. By October 2009, the unemployment rate had increased to 10. 2%.

Taking into account those employed part time for economic reasons and discouraged workers was 16. 3%. (Bureau of Labor Statistics, US Government, 2009) In Spain, the unemployment rate stood at 18. 7% (37% for youths) in May 2009 — the highest in the eurozone.

(CBCNews. ca, 2009) In July 2009, the unemployment rate was reduced from 9. 5% to 9.

4%. Even fewer jobs were lost in August, 216,000, recorded as the lowest number of jobless since September 2008, but the unemployment rate rose to 9. % in October 2009, it is said that some employers who cut jobs due to the recession are beginning to hire them back. The rise of advanced economies in China, India, and Brazil increased the total amount of word job market significantly. With the rapid development of communication and education in these countries, there are more workers allowed to compete with workers in traditionally strong countries, such as the United States.

This has a negative effect on wages and contributed to unemployment. (Telegraph, 2009) In addition, Britain has equal situation in terms of job market. . Influence on the UK job market 1.

Short-term changes |[pic] | The left graph shows that the employment rate for July to September 2007 in the UK was 74. 5 percent, peaking at 75 percent in the year-end and dropped to around 72. 5 per cent for July to September 2009, a fall of 0. 1 percentage point on the quarter. The number of people in employment increase by 6,000 to 28.

93 million, which was the first quarterly increase since May-July 2008.There were 997,000 employees and self-employed people working part-time due to the tight job market. The right graph reveals that the unemployment rate jumped from below 5.

5 per cent at the end of 2007 to 7. 8 percent for July to September 2009. The number of unemployed people increased by 30,000 over the quarter to reached 2. 46 million, which were the smallest quarterly increases in unemployment since March-May 2008. The jobless rate for 18 to 24 year olds rose by 0.

7 per cent on the quarter to reach 18. 0 per cent, the highest corresponding figure since 1992. (Office for National Statistics, 2009) . Long-term changes [pic] The graph shows that the number of unemployed in the first three quarters of the current recession (quarter 3 2008 to quarter 1 2009), have increased by 530,000. This is 1.

7 times higher than the increase of 304,000 in the first three quarters of the 1990s recession, and 1. 2 times higher than the increase of 434,000 in the 1980s recession. In quarter 1 2009, the unemployment rate rose by 12. 4 per cent on the quarter to reach 2.

2 million. This was the largest quarter on quarter increase since the fourth quarter of the 1980s recession.Admittedly, the changes are influenced by the size of the population, which is larger now than in the past.

Unemployment levels and rates after the 1980s recession did not return to the levels before the start of the 1990s recession. This indicates that the economy did not provide employment opportunities to counter the growth in the labour supply and people who became unemployed due to the recession. (Office for National Statistics, 2009) Besides, the recent condition of UK job market is quite complicated. 5. Analysis of current situation in the UK 1. “British jobs for British workers”Prime Minister Gordon Brown received much criticism when he promised “British jobs for British workers” in 2007. It is believed that migration increasing labour market flexibility, meeting skills gaps and improving job matching.

Figures show that over the five years to the middle of 2006, that contribution to workforce growth was about 0. 5 percentage points a year compared with around 0. 2 percentage points a year from natural population change. The Treasury estimates that migration has increased the economy by approximate 15 to 20 per cent, equivalent to around 6 billion in 2006.

There is evidence of more economic benefits from migration in terms of enterprise, innovation and investment. Business surveys show that employers particularly value migrants because of their skills, and their positive impact on productivity. (HM TREASURY, 2008) Minister for Employment and Welfare Reform Stephen Timms said: “Migrants from Eastern Europe have come to the UK to work and have been a benefit to our economy, allowing companies to grow and create more jobs. The numbers of people claiming unemployment benefits are at levels as low as 30 years ago, while the number of vacancies in the economy continue to rise.

What we need to do now is ensure we continue helping those young people with low skills to get the training and support they need to make the most of the opportunities which exist. ” (HRM Guide, 2008) 2. Job shortage for unskilled youths It is reported that youth jobless rate in the UK has increased from 11% to 14% since 2002, only 45% of low-skilled youths have found jobs a year after leaving school, and there has been a substantial decline in long-term youth unemployment – down from 23% to 16% since 1997.The OECD said that young people in the UK who leave with good qualifications “fare better” in employment than their international counterparts. For those who achieve the benchmark of five good GCSEs, 67% will have a job a year after they leave school.

But for those who leave education and training with poor qualifications and low skills, only 45% who do not achieve this level will have jobs. This reflects the changes in the economy, with opportunities being created in the high-skills sector, while unskilled jobs are in decline.It is a high risk of poor labour market outcomes and social exclusion for youngsters leaving school without qualifications. In the UK the number of youngsters not in education or training is 13% – above the OECD average and higher than the 11.

6% figure for 1997. (BBC, 2008) 3. Tendency of the UK job market A respected think tank predicted that the UK economy could decline for another year and take a further two years to recover, the UK unemployment recently reached two million for the first time since 1997. Nationwide said consumers’ confidence index fell for the ninth consecutive month in March.The building society’s survey came as a report from the Recruitment and Employment Confederation/KPMG showed little sign of a strong recovery in the number of permanent jobs available in the UK. Although the figures rose from 30. 3 in February to 33. 5 in March, it was still below the 50 level, where growth begins.

“These latest figures leave no doubt that the UK jobs market is at its worst in the 11-year history of the survey and recovery might take longer and be more protracted than many hope,” said Mike Stevens, partner and head of business services at KPMG.However, the Nationwide’s survey of 1,000 consumers indicated that they had become more optimistic about the UK economic conditions. “The expectations for property price falls continued to moderate during the month, with consumers thinking house price values will fall by 3% in the next six months, compared with a predicted 4. 7% drop in the previous survey” (BBC, 2009) Therefore, it is irresponsible to keep a blind eye on this issue which may have severe consequences. 6. Potential solutions There are three primary approaches to improve the UK job market.Firstly, accelerating employment creation, jobs recovery and sustaining enterprises, this can be achieved by investing in workers skills development to improve employability, especially for those having lost or at risk of losing their job; limiting or avoiding job losses and supporting enterprises to maintain their workforce through well-designed strategy conducted by social dialogue and collective bargaining; increasing investment in infrastructure, research and development, public services as important ways to creating jobs and stimulating economic activity.Secondly, building social protection systems and protecting people, it contains introducing cash transfer plan for the poor to meet their immediate needs and to alleviate poverty; extending the duration and coverage of unemployment benefits; providing adequate coverage for temporary and non-regular workers.

Finally, strengthening respect for international labour standards through respect for fundamental principles and rights at work, which is crucial for recovery and development; a number of international labour Conventions and Recommendations are relevant; the ILO Declaration of Principles concerning Multinational Enterprises and Social Policy is an vital and useful tool for all enterprises. (International Labour Organization, 2009) 7. Conclusion In conclusion, the global financial crisis (2007-2009) has a severe impact on the UK job market. In this case, effective measures must be taken before things get worse.This can be achieved by accelerating employment creation, jobs recovery and sustaining enterprises; building social protection systems and protecting people; strengthening respect for international labour standards. The UK job market is experiencing its toughest time, it is time that it aspired to reverse the disturbing trend and have a prosperous and harmonious future. 8. References BBC.

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Retrieved October 14th, 2009 from: http://en. wikipedia. org/wiki/Late-2000s_recession Office for National Statistics. (2009, November 11th).

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Retrieved October 15th, 2009 from: http://www. hm-treasury. gov.

uk/d/bud08_strategicchallenges_645. pdf Sara Lemos and Jonathan Portes. (2008, June 11th). Migrants Have No Effect On Unemployment. Retrieved October 14th, 2009 from: http://www. hrmguide. co.

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