Job loss, joblessness or unemployment is major social problem that affects many individuals, communities and countries today. There are various forms of unemployment such as frictional unemployment, structural unemployment, voluntary unemployment, classical unemployment and cyclical unemployment. Frictional unemployment usually results from the time lag or interval when people change jobs or move from one occupation to another. Structural unemployment is caused by a disparity in skills required by employers in the labor market and the skills possessed by potential employees. According to Franz (2010), structural unemployment can also be caused by factors such as occupational and geographical immobilities and technological changes. Occupational immobility is a situation where workers are not able or take long to learn new skills required in the labor market, whereas geographical immobility is the inability of workers to move from one region to another in job search (Walters & Bartos, 2005).
On the other hand, classical unemployment occurs when real wages in the labor market are pushed above the equilibrium wage. When real wages are pushed above the equilibrium wage in a perfectly competitive labor market, employers become reluctant to hire people. Consequently, the supply of labor exceeds the demand and leads to classical or real wage unemployment. Voluntary unemployment occurs when jobseekers choose to remain jobless and are unwilling to take the available jobs. Lastly, cyclical unemployment usually occurs during economic recessions as a result of negative economic growth and development. Cyclical unemployment results from decline in aggregate demand for goods and services as a result of low economic growth.
What Causes Job Loss?
Although ordinary citizens may think that they are jobless because they cannot simply find jobs, economists have cited factors such as market failures, social factors like wars, conflicts and rural to urban migrations, low levels of education and technological changes as the major causes of unemployment. Joblessness can also be caused by changes in seasons, for instance, farmers may become jobless during the dry season and become employed when the rainy season starts. Some causes of joblessness are interrelated while others, like aggregate demand for goods and services, are highly complex and difficult to understand. Additionally, induced unemployment may be caused by unsupportive government policies such as setting high minimum wages or formulation of policies that do not encourage economic investments. People may also lose jobs as a result of discrimination at the workplace, for example, gender and racial discriminations. Generally, these causes can be broadly categorized as economic and noneconomic.
For the purposes of this research study, the economy as a major causer of job loss will be discussed in this paper. Various changes in the economy such as negative economic growth and development, economic crises and recessions, and decline in economic activities, such as foreign direct investments (FDIs), have been cited as the main economic factors that often lead to massive job loss. For example, during economic recessions or slowdowns, most firms usually incur losses, and thus develop, formulate and implement various strategies for reducing the costs of production and operations. Cost reduction strategies usually involve reducing the rate of consumption of factors of production such as labor and capital and inputs for production like raw materials. As a result, most workers often get laid off from their employments by firms that opt to cut their operational costs and expenses.
Joblessness has also been linked with the economic capability of an individual. For instance, most youths often remain unemployed because they do not have adequate economic resources that would assist them in starting personal business or making investments. Based on these arguments, it is thus prudential to conduct a research study that elucidates and clarifies the connection between the economy and job loss.
The purpose of this paper is to determine in what way job loss is dependent on the economy. Thus, the research question for this study is: how is job loss connected or associated with the economy? In order to answer this question effectively, a survey will be conducted to collect the views of people regarding the impact of the economy on joblessness. The core idea of the hypothesis of this research study is to establish the connection, relationship or link between job loss and the economy by reviewing rates of unemployment under various economic conditions.
Scope of Study
This research will review various research studies that have been carried out to establish the relationship between job loss and the economy. Various aspects of the economy such as boom, recession and depression will also be taken into consideration. The bulk of this research study will link job loss to the economy. The data collected during the study will be used to gauge and analyze the connection between job loss and various economic conditions.
Definitions of Job Loss and Economy
Job loss refers to the state of being unemployed. It also can be referred to as joblessness or unemployment. According to Summers (2009) job loss, joblessness or unemployment means a situation in which those people who are willing and able to work, and are actively seeking for employment opportunities are not able to secure jobs at the prevailing wage rates in the labor market. Thus, according to this definition provided by Summers (2009), a person is considered unemployed or jobless only if he or she is willing and able to work and is actively involved in job search. People who do not work and are not actively looking for employment opportunities are not regarded as jobless.
On the other hand, an economy refers to a system of factors of production such as land, labor and capital, manmade and natural resources, and activities such as trade that result into the production, distribution and consumption of goods and services within a community or country. Beeson and Slesinger (2011) and Eisner (2009) define economy as the art and science of generating wealth. In my opinion, the economy refers to a set of interrelated activities that help in establishing the most appropriate ways of allocating and utilizing scarce resources in the production and consumption of goods and services within a country or a given geographical territory.
An analysis of previous research studies on job loss reveals the mentioning of the economy as a major contributing factor to joblessness amongst many people in the United States of America. For example, the U.S. Bureau of Labor Statistics reported that more than twelve million people lost their jobs in 2012 due to aftermath effects of the 2008/2009 global economic recession (Bureau of Labor Statistics, 2012). This represented nearly eight percent of the entire American population.
According to Mulligan and the National Bureau of Economic Research (2009), increase in unemployment rates in the United States was fueled by various economic factors such as increased global competition and outsourcing of production services to countries with cheap labor. In addition, automation of production processes and increase in population were mentioned as factors that contributed to job loss. Before the 2008/2009 economic recession, more than nine million jobs had been being created annually. However, this number rapidly declined to two million when the U.S. economy started experiencing the negative effects of the economic recession. Similarly, the decline in number of newly created jobs was linked to severe effects of subprime mortgage crisis which greatly influenced the economy of the United States. Mulligan and the National Bureau of Economic Research (2009) further state that the rate of job loss was rising steadily at the rate of 5 percent annually between January 2008 and October 2009 due to the economic crisis. The number of people who lost their jobs rose from seven million in early 2008 to sixteen million in late 2009. More than eight and fifty hundred thousand people lost their jobs every month during the peak of the 2008/2009 economic recession.
In the United Kingdom, the number of people who lost their jobs due to the two economic recessions that were experienced in 1980?/ 1983 and 1990 /1992 was nine hundred thousand, and two million respectively (Dixon & Thirlwall, 2001). During the 2008/2009 economic recession, the number of people who lost their jobs in the United Kingdom increased to two and a half million. Moreover, the number was speculated to rise further to approximately three million by late 2010 if the economic situation did not improve (Evans, 2011).
The major research and data collection methods that were used during the study are interviews and questionnaires. During the study, a sample of 500 people was interviewed and another sample of 3000 people surveyed through questionnaires. Data collected from both the interview and the survey were compiled, analyzed, and statistical computations were carried out. The participants were selected randomly across the nation. Random sampling was used because it provides equal chances for involvement in the study to all participants. All the participants were adults aged between 18 and 45 years who are eligible for employment, but were currently unemployed after losing their jobs. The participants were asked to rank factors that led to their unemployment under two broad categories, namely economic and noneconomic factors.
Results of the Study
To test the hypothesis, a number of statistical computations were carried out to establish the connection between job loss and the economy. During the study, regression and correlation analyses were used to establish this relationship. From the analyses, 87 percent of the respondents asserted that the economy was the greatest contributor of their job loss. The remaining 13 percent believed that job loss is caused by noneconomic factors. Statistical analysis of the data collected showed that there was a strong positive correlation (0.82) between job loss and the economy. Economic growth and development was listed as the main economic factor that affects the availability of jobs. Under the category of noneconomic factors, education topped the list. It was also revealed that 71 percent of the respondents reportedly lost their jobs during hard economic times. The research study also found out that only 15 percent of the participants expected to be re-employed during the period of economic recession. The results of the study are presented in the figures below.