Government Policies

Unemployment & Social Security Spending: Government Policies

Unemployment & Social Security Spending: Government Policies

Introduction

Welfare services account for a large part in the economy of UK. Likewise, designing a framework of social security spending policy is often the largest part of the government's budget. The paper strives to present the assessment of government's policies towards dealing with unemployment and government social security spending. The long-term unemployment and the large size of government's social security budget are the two major concerns and targets of any UK government. Prior governments have addressed these issues by introducing new initiatives such as the 'Welfare to Work' initiative, which was introduced by the Labour government in 1997. The main of the paper is to facilitate provision of a detailed account and an evaluation of the policies being adopted by the present coalition government to address these issues.

Overview of the Issue: Unemployment

In UK, an unemployed is a person who is registered as available, able and willing to work at the current wage rate, but is not able to find work even after dynamically searching for work. The active and dynamic search of work is an important point to consider as the person may not be considered as unemployed, if he could not show the evidence of being active in the job search. Unemployment, in UK, is measured through the following two measures:

The Claimant Count

This measure include people, who are unemployed and eligible to claim the Job Seeker's Allowance (JSA) or the people having sufficient National Insurance Credits. It is considered as the 'head-count' of the unemployed people claiming unemployment benefits. The unemployed people who satisfactorily meet the above criteria are eligible for receiving JSA including the New Deal Programme.

The Labour Force Survey

This measures the number of people who were jobless including part time work, but have actively and genuinely searched for work in the last month and are free to start work in the next two weeks. This measure also includes those people with work, but have not started working yet, and will start working in the next two weeks.

This survey is a widely and globally accepted measure for measuring unemployment in any country, which provides an enormous source of data on unemployment of millions of people across the country. However, this measure also possesses a potential of sampling error as it deals with a relatively large number of sample.

The most recent changes and forecast in the claimant count measure of unemployment is summarised in the chart below:

Underlying Causes of Unemployment

There are several main causes of unemployment in an economy. Following are some of the underlying causes of unemployment:

Cyclical Unemployment

It is the involuntary unemployment or the Keynesian's 'demand deficient' unemployment, which occurs from a lack of demand of goods or services. Cyclical unemployment usually occurs when the economy is facing severe recession, which leads towards closure of business units, plants, and increase in employee lay-offs or redundancies. The cyclical unemployment also greatly impacts the national output. Businesses look for controlling costs by laying-off workers ...