Business | Analysis

Looking for the cause of lingering unemployment

Current high unemployment rates are not linked to just the crisis

  • By Mohammed Al Asoomi; Special to Gulf News
  • Published: 12:44 January 30, 2013
  • Gulf News

It is known that unemployment rates increase sharply in times of economic crises, but they usually return to normal levels after the crisis is over and economic activities return to normal — accompanied by a strong recovery within the economic cycle.

However, the current crisis, which has been ongoing for five years, has its own circumstances and characteristics. By analysing them, we can find out the causes that stand behind high unemployment rates, which reached up to 26 per cent in Spain and Greece.

This crisis, which came in view of international conditions and scientific inventions, is totally different from other crises, including the great depression in the late 1920s and early 1930s.

The current crisis has occurred in the era of globalisation, opening up of markets and correlation of global economies in an unprecedented manner, leading to the rapid movement of capital and the transition of the effects of the crisis quickly — like the quick spread of epidemics. This led to aggravation and deterioration in economic conditions and a rise in unemployment rates-which reached record levels of 11.9 per cent in Eurozone in last December. The alarming proportions are attributed to many factors that distinguish the current crisis from other crises.

Among these factors, what comes first is the impressive technological advancement in the past three decades, which has led to automated and modernised business sectors, thus abandoning the manual and office professions. This resulted in the loss of millions of jobs in the financial and banking sector, as they were replaced by ATM and cash transactions machines available for 24 hours.

Dramatic changes

While internet services have brought about a radical shift in shopping and payment of financial obligations and services in all their forms, including money transfer — jobs previously carried out by individuals and staff in all production facilities and public services. These dramatic changes also included the productive sector which has become more dependent on software programmes, which replaced workers and personnel working in various production facilities.

Second, the world witnessed a massive privatisation process in the past few decades where many government entities shifted to the private sector, or the so-called privatisation, which means getting rid of many workers, intensifying work and embracing new techniques to maximise profits, leading to cutting employment rates in many countries.

The third factor is that acquisitions and mergers of major institutions have intensified during the crisis, which simply means reducing operating and production costs.

In this case, workers are the first to be thought about when it comes to cost cutting. This is because the new owner or the new institution that emerged from the merger is trying to prove that what was done is financially and profitably justified.

Therefore, the current high unemployment rates are not linked to the crisis only, but also to a number of factors that have aggravated them and created new circumstances related to unemployment that are not easy to deal with or finding practical solutions.

Developing world

However, dealing with its effects and reducing its intensity varies significantly between developed and developing countries. in the first group, high quality of education leads to graduation of highly qualified people who can cope with the latest developments meet qualitative demand in the job markets in developed countries, noting that population growth is low, yet almost non-existent in some European countries.

In the developing world, excluding some oil-rich countries, the situation is completely different in most, where there is poor education that does not include all due to lack of potential and the difficulty of access to remote rural areas, creating a huge gap between the modest education outputs and the requirements for modern economies depending on technology and electronic transactions. This besides excessive population growth that increases burdens and leads to lower living standards and poor services in general, including education-related services, creating new queues of unemployed and unskilled and unqualified manpower.

No one can claim that finding a solution to these dilemmas is at hand, but on the contrary there are socio-economic complications, and even religious ones related to education and curbing population increases. This means that compatibility between the age of the internet and globalisation, and resolving some of their repercussions, such as unemployment is flexibility and adaptive in developed countries. Yet, it is a serious matter—likely to get worse and lead to social unrest and deterioration in the living standards in developing countries-already suffering from complicated structural problems.

Due to the interrelated globalisation conditions, it is required to have some kind of international coordination — not only for assistance, but also in order to exchange experiences, improve the quality of education and adopting scientific and educational means to raise the level of education and reduce the excessive population growth.

This is simply because if crises intensified in the poor South, its consequences, as proven, will not be limited to this part of the world, but will extended to include the countries of the developed North — which is rich in human and financial resources.

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