Macroeconomics Private Consumption

Question: Discuss about theMacroeconomicsfor Private Consumption. Answer: Introduction The present report aims to analyse and examine the impact of rising youth unemployment on the economic growth of the UK. The evaluation is carried out with the help of data provided in the case study. In this context, the report examines the impact of private consumption and net exports on the UK economic recovery in the year 2011. The effect of rising youth unemployment on present and future economic growth of the country due to wage scarring is also discussed in the report. At last, the report evaluates the significance of vocational education as a measure to be implemented by the UK government for reducing the rising unemployment level in the country. Importance of Private Consumption and Net Exports on the UK Economic Recovery in 2011 As depicted in the case study data provided, the economy of the UK experienced an economic downturn in the period of 2007-2011. This was largely on account of recession faced by the economy after the global financial crisis of the year 2007. The prolonged negative growth faced by the economy as reflected by the declining real GDP growth rate of the UK from 2007-2011 caused high level of unemployment in the country. The level of unemployment was highest among the youth population group of the country responsible for economic downfall in the period 2007-2011 (Bracke and Martin, 2012). However, the UK economy started to recover in the year 2011 as reflected from the data on account of its low private consumption and increase in net exports. Private consumption declined from 61.1% to 59.7% from the period of 2007-2011. The government consumption also remains stable in the period of 2007-2011 contributing to increase in GDP growth rate in the year 2011. The rise in exports in the year 201 1 also has a wide impact on increasing the GDP growth facilitating economic recovery of the UK. The countries that are members of European Union are largely impacted by the global recession and thus the amount of exports to these countries by the UK reduced significantly in the period of financial crisis. Stronger growth of exports to the countries outside the European Union helped the economy of the UK to recover from the negative impacts of global recession. The greater amount of exports as compared to imports resulted in creating a positive contribution to GDP causing about 1.4% increase in net trade in 2011. This was mainly due to increase in countrys exports to outside countries that are not a part of European Union (Dimsdale and Hotson, 2014). Impact of Youth Unemployment on Present and Future Economic Growth Due to Wage Scarring Wage scarring is defined as the long-term impact of youth unemployment on the economic growth of a country. The data presented in the case study reflects that unemployment level in the UK is on increase between the periods of 2027-2011. The rise in level of unemployment is directly related with the decline in real GDP growth rate due to less tax revenue generation and increased investment of the government on promotion social benefits to unemployed section of the population. The continuous increase in unemployment rate in the UK among the younger generation will leave a wage scar that will persist in the middle age. This is because unemployed people often have less skills and competencies than employed individuals and thus have lower chances of getting hired in the period of positive economic growth also. Being unemployed for longer duration leave a negative mental impact on an individual thus degrading his/her personal skills and competencies (Fars and Tiongson, 2007). Also, some sk ills are developed in an individual during his/her job tenure and as such unemployed youth of today are more likely to become unskilled old age group of the country. The unemployed youths of the UK presently are at risk of getting reduced chances of employment as businesses often do not find them suitable for hiring due to their lower morale and self-esteem. It has a negative impact on their career growth and therefore reduces their chances of getting higher job role in the business organisations. Young people unemployed for longer period of time are usually offered low pay jobs and fewer opportunities for professional growth and development. As such, they lose their self-confidence and become dependent on their families. Employers generally prefer highly skilled individuals having good experience in the required field for higher authority jobs in their companies. Therefore, the global recession that caused high unemployment rate in the UK between the periods of 2007-2011 is likely to leave a wage scar due to which youth unemployment will have an negative impact on present and future economic growth (Berg, 2015). Reinventing Vocational Education as a key to Reduce Unemployment in the UK Vocational education means providing training to learners preparing for seeking a job role in the business companies. Vocational education is different from the academic learning as it mainly aims to provide special skills and training to the learners for meeting the industry standards. It is basically non-academic in nature and is meant only for developing specific skills and qualities in a learner related to a particular trade or occupation. Vocational education is emerging as major solution for the problem of rising unemployment among the youth populations of the developed countries such as the UK. Employers are pointing towards the lack of relevant skills in the job seekers responsible for their unemployment. The lack of skills in the youths is responsible for widening the gap between supply and demand of competent workforce across the industries of the country. The vocational education will prove to be extremely beneficial for enhancing the job performance of population of the c ountry. It will increase their chances of employment in comparison to the population of other countries. Vocational education presents an potential opportunity to the learners to pursue their dream job by making them ready for the professional world. As such, the UK government should aim to reinvent vocational education for developing proper job skills among the youths so that they become capable of gaining employment (Can vocational learning tackle youth unemployment?, 2016). The United Kingdom, in this context, has developed various apprenticeship programmes for providing vocational training to the learners. These programs specially aim at providing technical skills to the young generation of the country so that they can develop necessary knowledge about the various technologies used by the business corporations. This will increase the probability of their getting hired by the employers and thus reducing the unemployment rate of the country (Coughlan, 2015). The report published by the Policy Exchange states that British students are undertaking vocational courses for meeting the needs and preferences of the job market. The report also provided the fact that the Netherlands and Germany have lower youth unemployment rates in comparison to Britain due to high quality of vocational education. The report also cited the lack of proper vocational courses in the UK to be the main reason responsible for increasing youth unemployment rate. Therefore, the UK gover nment is placing an increased emphasises on integrating vocational courses to the students in addition to the academic learning to prepare them for the future job growth opportunities (Can vocational learning tackle youth unemployment?, 2016). Conclusion It can be summarised from the overall discussion held in the report that rising youth unemployment rate in the UK is having a major negative impact on the countrys economic growth. Wage scarring is responsible for long-lasting impact of youth unemployment on economic growth of the UK. The possible solution that can be taken by the government of the country for reducing youth unemployment includes imparting vocational education to the learners in order to prepare them for the future job roles and expectations. References Berg, J. 2015. Labour Markets, Institutions and Inequality: Building Just Societies in the 21st Century. Edward Elgar Publishing. Bracke, T. and Martin, R. 2012. From Crisis to Recovery: Old and New Challenges in Emerging Europe. Springer. Can vocational learning tackle youth unemployment? 2016. Retrieved October, 11, 2016, from https://fullfact.org/education/can-vocational-learning-tackle-youth-unemployment/ Coughlan, S. 2015. Vocational education's global gap. Retrieved October, 11, 2016, from https://www.bbc.com/news/business-35061496 Dimsdale, N. and Hotson, A. 2014. British Financial Crises Since 1825. Oxford University Press. Fars, J. and Tiongson, E. 2007. Youth Unemployment, Labor Market Transitions, and Scarring: Evidence from Bosnia and Herzegovina, 2001-04. World Bank Publications.