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What Should Be Done about Rising Unemployment in the UK?

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Author Info

  • Bell, David N.F.

    ()
    (University of Stirling)

  • Blanchflower, David G.

    ()
    (Dartmouth College)

Abstract

This paper considers the issue of unemployment one of the most pressing issues facing the UK and other governments, as the current recessions deepens. It begins by trying to accurately date the beginning of the current downturn in the British economy, arguing that it is clear that the recession commenced in the 2nd quarter of 2008. It then examines whether this recession is substantively different from past downturns in the UK and argues that, although the extreme rationing up of credit marks the current recession as different, some of the labour market consequences, such as the concentration of unemployment among the young and other disadvantaged groups, is typical of past experience. The paper reviews past literature on the causes of unemployment, arguing that the origin of the present difficulties lies with a collapse in demand rather than with frictions in the labour market caused by institutional inflexibilities. There is a large literature on the negative impact of unemployment both on society and on individuals. The adverse societal consequences are reviewed in the next section, while we discuss some of our own research on the adverse consequences on the individual in Section 6. Just as in previous recessions, it is becoming clear that some groups will suffer a much higher incidence of unemployment during this downturn and therefore suffer to a greater than average extent the adverse individual effects that we discussed in Section 6. The evidence on the composition of these groups is reviewed and presented along with some of our own research on this issue in the following section. One of the key groups who are likely to be affected by the recession is the young. In Section 8, we review the particular difficulties faced by them in trying to secure a footing in the labour market. In the last two decades many governments have introduced policies (collectively described as Active Labour Market Policies or ALMPs) for direct intervention in the labour market to improve outcomes for particular groups and for the young in particular. The next section reviews the evidence on the success of these policies. The final section discusses some policy proposals which we offer to alleviate what we believe will be the very serious adverse consequences of the likely increase in unemployment in the UK over the short to medium term.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4040.

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Length: 108 pages
Date of creation: Feb 2009
Date of revision:
Publication status: published in two parts: 1) 'UK unemployment in the Great recessions': National Institute Economic Review, 2010, 214, R3-R25; 2) 'Underemployment in the UK in the Great Recession': National Institute Economic Review, 2011, 215, R1-R11
Handle: RePEc:iza:izadps:dp4040

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Keywords: youth unemployment; unemployment;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The NMW: a menace to youth?
    by chris dillow in Stumbling and Mumbling on 2011-10-03 13:44:49
  2. Unemployment: prejudice vs curiosity
    by chris dillow in Stumbling and Mumbling on 2011-01-22 12:33:08
  3. Living with a weak economy
    by chris dillow in Stumbling and Mumbling on 2011-11-17 15:02:19
  4. Structurally high unemployment?
    by chris dillow in Stumbling and Mumbling on 2010-08-09 13:37:05
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Cited by:
  1. David N. F. Bell & David Blanchflower, 2010. "Recession and Umemployment in the OECD," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 14-22, 04.
  2. Mathias Dolls & Clemens Fuest & Andreas Peichl, 2010. "Automatic Stabilizers and Economic Crisis: US vs. Europe," NBER Working Papers 16275, National Bureau of Economic Research, Inc.
  3. Liam Delaney & Michael Egan & Nicola O'Connell, 2011. "The Experience of Unemployment in Ireland: A Thematic Analysis," Working Papers, Geary Institute, University College Dublin 201116, Geary Institute, University College Dublin.
  4. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2010. "Automatic Stabilizers, Economic Crisis and Income Distribution in Europe," IZA Discussion Papers 4917, Institute for the Study of Labor (IZA).
  5. Mitra, Arup & Verick, Sher, 2013. "Youth employment and unemployment : an Indian perspective," ILO Working Papers, International Labour Organization 480686, International Labour Organization.
  6. Mathias Dolls & Clemens Fuest & Andreas Peichl, 2010. "Wie wirken die automatischen Stabilisatoren in der Wirtschaftskrise? Deutschland im Vergleich zu anderen EU-Staaten und den USA," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 11(2), pages 132-145, 05.
  7. Daly, M. & Delaney, L., 2013. "The scarring effect of unemployment throughout adulthood on psychological distress at age 50: Estimates controlling for early adulthood distress and childhood psychological factors," Social Science & Medicine, Elsevier, Elsevier, vol. 80(C), pages 19-23.
  8. Misbah Tanveer Choudhry & Enrico Marelli & Marcello Signorelli, 2012. "Youth unemployment rate and impact of financial crises," International Journal of Manpower, Emerald Group Publishing, Emerald Group Publishing, vol. 33(1), pages 76-95, June.
  9. Verick, Sher, 2009. "Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn," IZA Discussion Papers 4359, Institute for the Study of Labor (IZA).
  10. Cazes, Sandrine, 2009. "Labour market policies in times of crisis," ILO Working Papers, International Labour Organization 434163, International Labour Organization.
  11. Dolls, M. & Fuest, C. & Andreas Peichl, 2011. "GINI DP 23: Automatic Stabilizers, Economic Crisis and Income Distribution in Europe," GINI Discussion Papers, AIAS, Amsterdam Institute for Advanced Labour Studies 23, AIAS, Amsterdam Institute for Advanced Labour Studies.
  12. Johannes Schweighofer, 2012. "Ohne Perspektive - Jugendliche auf segmentierten Arbeitsmärkten in der EU," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 38(4), pages 749-770.
  13. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2009. "Wie wirken die automatischen Stabilisatoren in der Wirtschaftskrise? Deutschland im Vergleich mit der EU und den USA," IZA Standpunkte, Institute for the Study of Labor (IZA) 19, Institute for the Study of Labor (IZA).
  14. Olga Demidova & Marcello Signorelli, 2010. "The Impact of Crises on Youth Unemployment of Russian Regions: An Empirical Analysis," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 78/2010, Università di Perugia, Dipartimento Economia, Finanza e Statistica.

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