Introduction: employment and Skills (2014), Bell (2015), and

 

Introduction:

A number of studies have been made focusing on
the effects of the 2008 Recession on European countries. This paper will
attempt to compare the change in unemployment levels between Greece and the UK
following the Financial Crisis and will be a 10- year period of analysis. The
main Academic Papers I will be using to support my argument are: Elsby (2010),
Christodoulakis (2013), Matsaganis (2014), The UK commission for employment and
Skills (2014), Bell (2015), and Tsampra (2017)

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Background on Greece and UK’s economy before
the recession. Mention previous recessions and explore the effect they had on
both countries. Leading up this recession Greece had a very large current
account deficit compared to other countries in the Eurozone.

 

 

Literature Review:

There is an extensive body of published
literature focusing how the economy has changed since the recession. My paper
is unique and differs from previous studies as it will focusing on comparing
the unemployment levels of Greece and UK between the periods 2008 to 2017. I
will also analyse whether Greece can use any of the policies that the UK has
previously used to tackle unemployment.

 

To gain a more informed perspective of how
unemployment has changed in Greece and UK since the Great Recession, an
understanding of what unemployment was like before the crisis is necessary.

 

Determinants
of unemployment

Unemployment
before the Crisis

How was
unemployment affected directly after the crisis?

How did
Greece and UK attempt to deal with the crisis?

 

 

1.   
This paper discusses how the Greek
government attempted to rectify the effects of the 2008 financial crisis
through the use of austerity policies. Matsaganis (2014) focuses on how these
policies lead to an increase in poverty and inequality within Greece’s economy.
Furthermore the study highlights that the austerity measures such as VAT rising from 19% to 23% in 2010 and
public sector pay being reduced (find
evidence how much) resulted in the cost of living and production increased
contributing to numerous businesses becoming bankrupt, therefore leading to a
rise in unemployment levels.  Mantsaganis
also argues that Greece’s struggling economy and mounting debts, with the budget deficit being 15.6% of GDP in 2008, before
the financial crisis was the reason why fiscal contraction was ultimately
inevitable. Consequently leading to an even greater impact on GDP and hence
unemployment levels than if Greece’s economy was more stable before the crisis.

 

 

2.    Bell (2015) argues that
youth unemployment is one of the biggest economic challenges that Greek has had
to face as a result of the Great Recession. Bell’s study demonstrates that
Greece’s youth unemployment levels were significantly higher than unemployment
levels from other European countries. Compared with the United Kingdom’s rate of 17.9%, Greece has a youth unemployment
level of 53.1%. Bell illustrates the
reason why youth unemployment is often higher that adult rates of unemployment
especially during a recession is because young people will often have a lot
less experience and work skills than older workers which results in young
workers experiencing an ‘experience
trap’.  During a recession where
finding a job is more difficult to find younger workers will face a
disadvantage compared to older workers who have had more experience in the
field of work.

Bell also focuses on the EU recognising that youth
unemployment was one of the biggest consequences to come out of the recession
and attempting to reduce these numbers through the introduction of Youth
Opportunities Initiative.

 

 

3.    Bell (2010): The impact on
UK unemployment as a result of the financial crisis was similar to that of
Greece as a large percentage of those unemployed rest heavily of younger people
ages 16-24. Bell believes one of the most prominent reasons for this is the
reduction in demand for labour which is a reflection on the responses caused by
the 2008 recession, one of the responses is a fall in consumer confidence…

In 2010 the UK saw 707,000
18-24
year olds facing unemployment making the percentage 17.2% of the total unemployment rate. Compared to Greece however
this amount is less than half of what the youth unemployment rate was in
Greece.

Furthermore unlike Greece the UK Labour government used a
fiscal stimulus which reduced unemployment levels.. (change
the way this is phrased)

 

4.   
Elsby (2010) not only focuses on the
effects of the recession on UK unemployment it also compares the behaviour of the UK economy before the financial crisis where it
makes the judgement that the impact on unemployment from this recession is far
less severe than the outcome of previous recessions. Elsby notes that the UK
suffered with high and persistent unemployment rates in the early and mid-1980s
which was most likely a result of high inflation rates caused by rising oil
prices and high inflation expectations. However this paper argues that once the
government tackled this issue, unemployment became relatively low and stable
(albeit not as stable as before 1960s and early 1970s) until the Great
Recession in 2008 which leads one to suggests that because the UK wasn’t able
to fully recover from previous recessions this was one of the main reasons that
resulted in the prolonged and deepening effect on unemployment.

 

5.   
The UKCES (2014) seeks to
determine why the UK has struggled far more to recover from this recession
compared to previous recessions. It firstly suggests that the Uk’s lack of
consumer confidence leading to a reduction in GDP is one of the main reasons
why the unemployment and thus the recession was so long lasting and had such a
deepening effect on the economy. Similar to Elsby this paper agrees that
although the reduction in the level of output was much sharper in the most
recent recession, the impact on unemployment was much less severe during the
2008 financial crisis compared to the previous 1970 recession.

 

If we look at specific
sectors within the workforce it can be seen that some industries we effected
more heavily than others. For example this paper demonstrates that the
Elementary, Skilled and Admin sector had been hit hardest with growth in
employment falling below -4% for all sectors. The UKCES agrees with Bell (2010)
as it highlights that the group of workers effected most by the 2008 recession
was young workers who, according to this paper, rose to over a million by 2013.
A possible reason for this is that younger workers typically work in the
elementary or admin sector once they leave education. Relating to Bell’s (2015)
paper it can be seen that both young workers in Greece and the UK found it
difficult to obtain a job during the financial crisis because of the lack of
skills they were able to acquire during their time in education. Therefore it
would seem that this is a result of problems within the labour market which
often leads to long term unemployment.

However this paper argues
that there are other sections of the labour market which have seem to have
brought growth to the UK economy. For example self-employment (find
evidence of how this has helped output) and a rise in
zero hour contracts which offers the opportunity of more flexibility for
workers. Haven’t finished yet go to section where the paper
talks about skills and policies.

 

6.    Tsampra’s paper (2017) focuses
mainly on the causes of unemployment and underemployment in post crisis Greece
and argues that it was mainly the fault of the inflexible and miss-matched
skills within the labour market. It was found that in 2015 it was within the
highly skilled workforce that had seen the largest fall in Greek employment
since the financial crisis. Similar to Bell’s papers, Tsampra illustrates that
young people were among those that were most affected by the recession in terms
of unemployment.

 

7.   
Aspergis (2005) analyses the
reasons behind why the natural rate of unemployment in Greece has risen from
the beginning of the 1980s to 2000. One of the most significant reasoning
behind this increase in the natural rate of unemployment is the falling levels
in productivity, Zonzilos and Hall (1997) found the figures of productivity to
fall by an estimated 13%. Furthermore Aspergis investigates the impact the
Greek government’s decision to impose expansionary fiscal policy. The
introduction of unemployment benefits has, according to Aspergis, resulted in
an even greater increase in the natural rate of unemployment as it has
dissuaded many consumers from returning to work if they are unemployed. 

8.   
This paper, Christodoulakis
(2013), explores how the Greek government attempted to reduce their
unemployment levels after the 2008 recession through fiscal and monetary
policy, however it was found that this was ultimately a failure. One of the
biggest outcomes of the crisis was the enormous amount of debt and public
deficit that Greece inherited. Greece was able to reduce the public deficit by
implementing austerity policies According to Christodoulakis, the Greek
government was able to shrink the public deficit to 6.6% of GDP in 2012
compared to 16% of GDP in 2009. After studying the ‘fiscal impact on growth’,
this paper found that public debt is disastrous to growth, therefore reducing
public deficit should be the government’s main priority if it intends to
increase GDP which in turn would lower unemployment levels. The main policies
the government attempted to impose was a cut in public expenditure and…

 

 

 

 

 

Methodology:

While I am aware that only a short amount of
time has passed after the 2008 financial crisis I will still run a regression
analysis from the period 1970 to 2017.  

I will be running a simple regression
analysis, comparing the causes of the unemployment levels between Greece and
the UK after the 2008 recession. This equation demonstrates the basic model
that I will be running:

 

 

 

My dependent variable is the unemployment rate
and my independent variables are GDP, Inflation, wages, public expenditure and
bank interest rates.  In order to gather
the value of these variables I will be using

I will also be analysing to what extent each
factor affects unemployment.

In terms of finding other data I will be using
the Beveridge curve.