In my essay practise revision notes, I took all of the past paper questions from previous years and split them up into sub-questions to help me to formulate paragraphs based on different concepts and arguments that I could memorise for the exam. The document will include my own style of writing and...
ESSAY PRACTICE - Applied
Economics - Youth Unemployment
Explain why youth unemployment should be a priority for the
government.
Unemployment is an inefficient use of resources, rather than producing
and contributing to GDP growth, an unemployed individual’s skills
depreciate over time, the longer they are unemployed, the more
damaging it is to the economy and to their own careers. Benefits receipts
increase, expenditure in the economy and tax revenues decrease
leading to lower growth and a higher budget deficit.
If it is the case that movement into another job is quick and costless, the
macroeconomic consequences will be small and there will not be a need
for government intervention. However, if there’s a lag and there’s a lot of
state dependence then the macroeconomic effects will be significant
enough to support the argument for government intervention.
In an economic downturn, the youth are the most vulnerable and will be
the most affected particularly if they have low education levels or are of
specific ethnic groups that are most disadvantaged. The concern for
economists is that if there is a likelihood that there is a long-run effect on
the individual after an unemployment gap then there is a likely chance
that there will be a long-run effect on the whole economy.
What is the economy currently experiencing with youth unemployment?
The youth have been hit hardest by the recent recession, recessions
also hit other groups so why prioritise the youth?:
“Solving youth unemployment is the most pressing problem
governments are facing today. Not dealing with the problem of high, and
rising levels of youth unemployment hurts the youngsters themselves
, and has potentially severe consequences for us all for many years to
come. The time is to act now. The young must be a priority.”
- Bell and Blanchflower 2010
In Bell and Blanchflower’s paper (2010) we are presented with reasons
why we should be concerned about youth unemployment and reasons
why it is increasing again in the first place due to present difficulties in
the labour market. The point that stood out the most to me in this paper
was about the impact of unemployment itself, the fact that
unemployment is a stressful life event that makes people, a wave of
unemployment causes happiness levels to fall for everyone, not just the
unemployed, and the fear of unemployment in the future lowers a
person’s subjective wellbeing. Unemployment increases susceptibility to
malnutrition, illness, mental stress, and loss of self-esteem, leading to
depression. Goldsmith, Veum and Darity (1996, 1997) found, for
example, using data from the US national Longitudinal Study of Youth
(NLSY) that being jobless injures self-esteem, and fosters feelings of
externality and helplessness among youths. These are just a few of the
damaging effects of unemployment. This is a clear representation that
youth unemployment is a pressing issue and should be addressed.
Human Capital, Matching and Signalling theory
Gary Becker (1975) defines:
- Firm specific Human Capital
- General Human Capital
Firm-specific skills are non-transferrable so increase the marginal
productivity in the firm providing the investment.
General skills: raise the marginal productivity in the current firm and all
future firms.
Unemployment leads to a depreciation of general skills, a loss of firm
specific skills which lowers the wage. If the new offered wage is below
the reservation wage, this will lead to further unemployment.
In Gary Becker (1993)’s Human Capital theoretical and empirical
analysis he emphasises that from his own theory and what others have
theorised is how important education and training is to improve future
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