The impact of underemployed, and those who have ceased working on the economy

THE IMPACT OF UNEMPLOYED, UNDER -EMPLOYED, AND THOSE WHO HAVE CEASED WORKING ON THE ECONOMY
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Table of Contents
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Abstract  PAGEREF _Toc380784358 \h
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1.0 Introduction  PAGEREF _Toc380784359 \h
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3.0A review of Literature  PAGEREF _Toc380784361 \h
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4.0 Analysis on the problems of Unemployment and Underemployment  PAGEREF _Toc380784362 \h
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5.0 Recommendations  PAGEREF _Toc380784363 \h
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6.0 Conclusion  PAGEREF _Toc380784364 \h
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References  PAGEREF _Toc380784365 \h
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Abstract
A consistent flow of stable income is the lifeline of any flourishing economy. Unemployment and underemployment breaks this flow since these groups of people do not have the cash inflow or outflow (Feldman, 2009). It is apparent that when money is not streaming into the economy, the economy’s growth subsequently becomes sluggish. The purpose of this paper is to evaluate the impact of unemployed, unemployed, and those who have ceased working on the economy.
This study employed a Qualitative research methodology, drawing on qualitative research methods such as library research, and desktop research to generate information regarding the present study. In essence, the study sought to understand the impact of of unemployed, unemployed, and those who have ceased working on the economy. Overall, the study established that effect of unemployment, underemployment, and those not working on the national economy was of paramount significant. In essence, the review has noted that the impact of unemployment and underemployment is so much crucial in initiating governments to shape their fiscal and monetary policies. It is hoped that the insights gained from this research will be helpful to various stakeholders including governments, business organizations, scholars and researchers as well as the public.

To Find Out the Impact of Unemployment and Underemployment on A Countries Economy
The effect of unemployment or underemployment is not only to the individual alone but also his or her family, dependants and the society. A part from the effect on the economy, unemployment or underemployment also brings with it emotional anguish, sorrow and despair. In essence, the unemployed, underemployed and those who have ceased working are a burden not only to the economy but also to the society. This owes to the fact that they do not contribute to the national economic output, although they are sharing it (Bockerman, and Ilmakunnas, 2009). The purpose of this paper is to find out the effect of unemployment and underemployment on the nation’s economy.
Background
At the end of 2012, 8.3 million individuals in America were multitasking on jobs for reasons related to the poor economy (Levine, 2011, 56). By 2013, that number had doubled to over 10 million (Brynjolfsson, and McAfee, 2011, 245). The rate of unemployment for American youths between 20-24 years increased by 10% between March 2012 to May 2013. At the end of 2013, about 2 million jobless people had completed school (Hazlitt, 2014).
Alpert (2013) observes that in recent perspective, cases of unemployment and underemployment have increased in both rural and urban areas. Owing to this aspect, more people are now working on family businesses, farms, hotels, and other forms of self-employment. Due to lack of employment avenues, individuals especially those with low qualifications resort to becoming peons, primary school teachers, waiters, porters, sales men and so on. Such professions are in most cases lowly paid and therefore, resulting in under-employment.
Apparently, underemployment essentially means that one has a job but the job does not satisfy their basic needs, or the particular job is not a full time one. Underemployment can be related in many ways to unemployment. This is because similar to unemployment; underemployment can result into a person’s life being severely downgraded. Underemployed people may not be able to effectively pay the necessary bills. This may make the person to turn to public assistance in order to obtain help (Maynard and Fieldman, 2012, 78).
The correlation between unemployment and GDP has been commonly referred as the Okun’s law. Okun’s law is essential the relation of the high national economic output with a decline in the number of unemployed people. This owes to the fact that in effectively increasing the economical output of any nation, people will need to work, thus, decreasing unemployment rate (Felices, 2011, 56).Studies on the correlation of unemployment and GDP indicate that for every percentage point decline in the rate of unemployment, GDP increases by 2.5%. According to analysts, the major reason for this large coefficient in this correlation is that, an increase in economic output will subsequently lead into firms to not hire new employees but will make the current workers to work for extended hours. Additionally, there are some industries that realize high returns in relation to scale where the impact of increasing the labor force on their output is multiplicative (Sloman, 2010).
Globally, unemployment, underemployment or lack of work has been identified as a bad thing. Scholars and Economics have made convincing arguments that there is a particular natural degree of unemployment, and underemployment that cannot be eliminated altogether from the society. However, it has been found that high level of these aspects creates a significant cost on not only on the affected individual but also on the society and the country at large (Lebergott, 2011).
Before the emergency of the great recession, the average rate of savings in the perspective of U.S had been gradually decreasing to the lowest rates. Reports have also emerged that in this country, the average person is only a few meters away from serious financial problems without a regular job. The broader unemployment rate in U.S currently stands at 17.4% (Coen, 2013). On average, there are seven unemployed people on each available job in U.S. Even individuals, who may be eligible for unemployment benefits or other types of government help (such as food provisions), such kind of benefits in most cases, only replace about 50% of their regular income. This translates that these individuals and those who earns a low amount of money from their employments are consuming less than normal. The economic effect extends far beyond the less consumption. A lot more people would turn to retirement savings and eventually drain them as a long-term consequence (Roger, 2011, 11).
In the perspective of EU nations, the rate of unemployment increased by 19% in 2012. This was attributed to emergency of another recession. Those mostly affected were the youth and young workers. During the same period, the unemployment rate for those aged 15-24 was 21.4%. Since 2010, the rate of unemployment has consistently risen in more than two thirds of European nations (Steininger, Rotte, 2009, 79). A report issued by the Financial Post in 2013 articulates that over 80 million youths around the world have no stable income.
3.0A review of Literature
In the perspective of the national checkbook, unemployment has led to higher payments from the federal and state governments in paying the “victims” inform of unemployment benefits. At the end of 2012, such benefits amounted to over $330 billion including other benefits such as food assistance, Medicare, and Medicaid. Lebergott, (2011) observes that governments that experiences high rate of unemployment, underemployment and retirees are no longer realizing the same level of income tax before the increase in this rate. Owing to these aspects, governments have now turned to either borrowing money or cutting down their expenses on service provision.
According to Chang, (2009), the bad side of unemployment and under-employment has come to be imminent in the present perspective. For example, more than 70% produced by the U.S economy usual goes to unemployed workers and personal consumptions. This aspect has hampered the economy negatively by reducing the national GDP as well as tempering with the efficient resource allocation (113). A note should also be taken that high rate of unemployment also affect companies has well. This is because benefits relating to unemployment are largely financed by taxes evaluated on businesses. In the situation of high unemployment, governments will in most cases look on how to replenish their budget by increasing taxation on companies. Counter-intuitively, this will discourage organizations from investing in that particular country and hiring more employees or improving the pay of the existing workers. Further, companies will not only face low demand for their products but it will also be expensive for them to hire or retain workers.
Studies have found that unemployment and underemployment as being the lead cause for susceptibility in illnesses, malnutrition, loss of self esteem, mental illnesses and depression. A study conducted by Social Indicator Research established that even optimistic individuals found it difficult looking at the brighter perspective of things when they were not employed or in the case when they were not paid appropriately. This study used data and information from interviews from participants in German who were aged 16-94. The participants included those who were coping with actual life stresses and not just those who had volunteered. Among the major findings in this study was that even individuals who were optimistic struggled with the issue of being unemployed or underemployed ((Hossfeld, 2010, 56).
Consistent unemployment subsequently leads to skill erosion, and essentially depriving the economy of the otherwise required talents. Similarly, the direct or indirect experience of unemployment changes the plan of employee behavior. Further, unemployment has also been known to cause great pessism and skepticism concerning the value of education and training in education. In particular, it has led to many employees to be unwilling for a long-term investment in the job training which some jobs require. Apparently, lack of stable income has forced many families to deny education opportunities for their children and subsequently depriving the economy on such necessary skills.
Sloman, (2012) notes that the high level of unemployment has led to civil unrest and in other cases to civil unrest. For instance, the fall of the Weimar Republic in 1933 and the rise to power of Adolf Hitler subsequently led to World War 11 where many millions of people died and property destroyed in many parts of Europe. This revolution was claimed to have been caused by deteriorating economical conditions in German at that specific time. The main issue in particular was the high rate of unemployment, which had reached over 20% (241).
Both the media and the public of any nation have traditionally regarded an increasing level of unemployment as a factor that can surely led to electoral defeat of the existing government that oversees it. An example of this aspect can be derived from the 1983 consensus in United Kingdom. At this time, the Conservative party that was headed by Margaret Thatcher won the general election by a landslide. This landslide victory was attributed to the party’s concern on the rising cases of unemployment at that time (Cordell, 2010, 456).
A research carried out by Felice, (2009) found out that the use of welfare programs such as accumulating debt and food stamps did not essentially replace the income that one had been receiving from his or her job. Another study by HYPERLINK "http://jir.sagepub.com/search?author1=Roger+Wilkins&sortspec=date&submit=Submit"Wilkins, (2011) was set to find out the impact of underemployment on various outcomes including welfare, and income dependence as well as the subjective well being. The authors employed information and data that had been gathered in 2001 by the Income, Household and Labor Dynamics in an Australia survey. The study findings suggested that while unemployment had a clear impact on various aspects of t...