Increase in the Unemployment Rates in the U.K.

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The UK’s unemployment rate reached its highest peak in 2011 at just under 2.7 million during the recent recession which economists are calling the Great Recession (BBC News, 2014). Since, however the fall in the rate of unemployment has not been as sharp as many predicted, concerns have been raised over whether unemployment levels in this single period may have a long lasting effect. The issue of hysteresis within the UK and the persistence of unemployment is what this paper will focus on, as well as the reasons why the youth unemployment rate is much higher. Using the Demand- deficient theory of unemployment, which is the Keynesian view of unemployment that suggest high real wages cause long term unemployment, I will examine whether this…show more content…
Another industry that has shown signs of employment growth during this hard time is the accommodation and food services industry. Which, outside of London, has seen a 4.8% increase in employment. This could be due to employees from other industries simply switching careers, which opposes the view of this model that skills diminish or are not transferrable between sectors of the economy (ONS, 2014). On the other hand this rise in employment could simply be due to the UK’s flexible labour market. Another industry that has experienced a downwards growth trend is the mining and quarrying industry. There has been a dramatic reduction in growth, as between the periods of early 2011 and the final quarter of 2013 the industry has been 35.2% below its pre-recession peak. However this industry decline has been slowly happening since 1999, this consequently could be a contributing factor to the issue of hysteresis as this is the second largest sub-industry of total production within the UK (ONS, 2013). This fits within the assumptions of the model of structural unemployment as the decline in the industry has clearly led to higher levels of unemployment. The long-term decline of such a large industry can often lead to long-term unemployment, such as we saw in the coal industry, which is a common cause of hysteresis. However this alone cannot be blamed for hysteresis. Blanchard and Summers wrote about three reasons for hysteresis and unemployment persistence, one more
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