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What Should Be Done about Rising Unemployment in the UK?

Author

Listed:
  • 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.

Suggested Citation

  • Bell, David N.F. & Blanchflower, David G., 2009. "What Should Be Done about Rising Unemployment in the UK?," IZA Discussion Papers 4040, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4040
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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 18:44:49
    2. Unemployment: prejudice vs curiosity
      by chris dillow in Stumbling and Mumbling on 2011-01-22 18:33:08
    3. Living with a weak economy
      by chris dillow in Stumbling and Mumbling on 2011-11-17 21:02:19
    4. Structurally high unemployment?
      by chris dillow in Stumbling and Mumbling on 2010-08-09 18:37:05

    Citations

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    Cited by:

    1. Neil Lee, 2014. "Grim down South? The Determinants of Unemployment Increases in British Cities in the 2008-2009 Recession," Regional Studies, Taylor & Francis Journals, vol. 48(11), pages 1761-1778, November.
    2. repec:ilo:ilowps:480686 is not listed on IDEAS
    3. Grinevica Liva & Kovalevs Raimonds, 2015. "Integration of Young People into the Latvian Labour Market," Economics and Business, Sciendo, vol. 27(1), pages 64-68, August.
    4. 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, vol. 11(2), pages 132-145, May.
    5. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2012. "Automatic stabilizers and economic crisis: US vs. Europe," Journal of Public Economics, Elsevier, vol. 96(3), pages 279-294.
    6. 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, vol. 38(4), pages 749-769.
    7. Floro Ernesto Caroleo & Elvira Ciociano & Sergio Destefanis, 2017. "The role of the education systems and the labour market institutions in enhancing youth employment: a cross-country analysis," Discussion Papers 1_2017, CRISEI, University of Naples "Parthenope", Italy.
    8. 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 19, Institute of Labor Economics (IZA).
    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 of Labor Economics (IZA).
    10. Isabel Aguilar-Palacio & Patricia Carrera-Lasfuentes & M. Rabanaque, 2015. "Youth unemployment and economic recession in Spain: influence on health and lifestyles in young people (16–24 years old)," International Journal of Public Health, Springer;Swiss School of Public Health (SSPH+), vol. 60(4), pages 427-435, May.
    11. David N. F. Bell & David Blanchflower, 2010. "Recession and Umemployment in the OECD," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 14-22, April.
    12. repec:clr:wugarc:y:2012:v:38i:4p:749 is not listed on IDEAS
    13. Mathias Dolls & Clemens Fuest & Andreas Peichl, 2011. "Automatic Stabilizers, Economic Crisis and Income Distribution in Europe," Research in Labor Economics, in: Herwig Immervoll & Andreas Peichl & Konstantinos Tatsiramos (ed.), Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, volume 32, pages 227-255, Emerald Publishing Ltd.
    14. Dolls, M. & Fuest, C. & Andreas Peichl, 2011. "GINI DP 23: Automatic Stabilizers, Economic Crisis and Income Distribution in Europe," GINI Discussion Papers 23, AIAS, Amsterdam Institute for Advanced Labour Studies.
    15. 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 78/2010, Università di Perugia, Dipartimento Economia.
    16. Kluve, Jochen & Puerto, Susanna & Robalino, David & Romero, José Manuel & Rother, Friederike & Stöterau, Jonathan & Weidenkaff, Felix & Witte, Marc, 2016. "Do Youth Employment Programs Improve Labor Market Outcomes? A Systematic Review," Ruhr Economic Papers 648, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    17. Mitra, Arup. & Verick, Sher., 2013. "Youth employment and unemployment : an Indian perspective," ILO Working Papers 994806863402676, International Labour Organization.
    18. Cazes, Sandrine., 2009. "Labour market policies in times of crisis," ILO Working Papers 994341633402676, International Labour Organization.
    19. Misbah Tanveer Choudhry & Enrico Marelli & Marcello Signorelli, 2012. "Youth unemployment rate and impact of financial crises," International Journal of Manpower, Emerald Group Publishing, vol. 33(1), pages 76-95, March.
    20. 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, vol. 80(C), pages 19-23.
    21. World Bank Group, . "Toward Solutions for Youth Employment," World Bank Other Operational Studies, The World Bank, number 23261.
    22. Ebell, Monique. & O'Higgins, Niall., 2015. "Fiscal policy and the youth labour market," ILO Working Papers 994898963402676, International Labour Organization.
    23. repec:ilo:ilowps:434163 is not listed on IDEAS
    24. Liam Delaney & Michael Egan & Nicola O'Connell, 2011. "The Experience of Unemployment in Ireland: A Thematic Analysis," Working Papers 201116, Geary Institute, University College Dublin.
    25. Floro Ernesto Caroleo & Elvira Ciociano & Sergio Destefanis, 2017. "Youth Labour-Market Performance, Institutions and Vet Systems: A Cross-Country Analysis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(1), pages 39-69, March.

    More about this item

    Keywords

    youth unemployment; unemployment;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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