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Economics

Internal Assessment
Individual Commentary Coversheet

Name:Audrey Teo

Economics
commentary no.: Commentary*#*2

Unemployment*Rate*at*10%,*Every*Fifth*Young*Person*without*
Extract Title:
Work*

Source/date of
extract: 21*July*2015

Date retrieved:
(if online)
18*Oct.*2015

Section of the
syllabus to which
the commentary Macroeconomics
relates:

Date the
commentary was 12*Nov.*2015
written:

Word count: 748


Unemployment rate at 10%, every fifth young person without work | Yle Uutiset | yle.fi 12/11/2015 20:37

News 21.7.2015 18:10 | updated 21.7.2015 18:18

Unemployment rate at 10%, every fifth


young person without work
Statistics Finland reports that the unemployment rate in Finland reached ten
percent in June 2015, up from 9.2 percent one year earlier. Youth unemployment
is over 22 percent already, with no signs of improvement in sight because there
are no jobs or internships to be had.

Over 280,000 people were registered as being without employment in Finland as of June 2015. Image:
Sampsa Tervaharju / Yle

According to a Labour Force Survey from Statistics Finland, there were 280,000 unemployed
in June 2015, a number 22,000 greater than one year earlier.

This put Junes numbers at 10.0 percent of the population, 0.8 percentage points higher than
June of 2014. Mens unemployment rate was 10.5 percent and womens 9.4 percent.

The Employment Ministry utilizes a different method for calculating unemployment, and its
figures from the end of June show a total of 368,900 jobseekers, or close to 32,000 more
than one year earlier.

There were over 110,000 long-term unemployed people who have been unemployed and
seeking work for more than a year - in June, an increase of close to 20,000, according to the
Ministry.

http://yle.fi/uutiset/unemployment_rate_at_10_every_fifth_young_person_without_work/8171703 Page 1 of 4
Unemployment rate at 10%, every fifth young person without work | Yle Uutiset | yle.fi 12/11/2015 20:37

Ministerial advisor Petri Syvnen says long-term unemployment was last this severe 17 years
ago, in the summer of 1998. He says Finland passed the one critical hundred thousand mark
in this area in January of this year.

The disguised portion of the population

In addition to the groups of employed and unemployed, Statistics Finland keeps statistics on
a third group: the almost 1.3 million-person-strong inactive population. This June 2015 figure
was also 18,000 higher than one year earlier.

Of the inactive population, 153,000 persons were in so-called disguised unemployment.


Statistics Finland uses the term disguised unemployment to refer to the persons outside the
labour force who would like gainful work and would be available for work within a fortnight,
but have not looked for work in the past four weeks. People in this category may have given
up searching for a job, are pursuing studies, are caring for their children or have withdrawn
from the job market for health reasons.

Young people have it the worst

Perhaps the most worrying development in the Finnish labour market is the rise in youth
unemployment. In June 2015, there were a total of 644,000 young people living in Finland
who were between the ages of 15 and 24. Of them, 345,000 were employed and 101,000
unemployed.

New Statistics Finland figures peg the June percentage of 15 to 24-year-old unemployed at
22.7 percent, up two percentage points from one year previous.

Employment Ministry numbers show that there were over 40,000 unemployed jobseekers
under 25 in late May, but by the end of June, that number had jumped to over 55,000.

http://yle.fi/uutiset/unemployment_rate_at_10_every_fifth_young_person_without_work/8171703 Page 2 of 4
Unemployment rate at 10%, every fifth young person without work | Yle Uutiset | yle.fi 12/11/2015 20:37

Image: Yle News Graphics

The increase indicates to some that Finlands attempts to mitigate joblessness among the
youth have proven unsuccessful. Others believe the numbers would be even worse without
them.

Former Employment Minister and MP Tarja Filatov defends government projects to assist
Finlands unemployed youth, like the much-touted Youth Guarantee. She says they have
been successful at helping young people draw up personal employment plans soon after
graduation. The problem, she says, is that Finlands dire economic situation crushes their
best-made plans quickly, as the jobs just arent there.

To make matters worse, there are not enough resources devoted to labour policies at
present. We cant use the Sanssi cards or other subsidies, she says.

A Sanssi card is a TE jobs office programme offering companies that hire unemployed youth
at least a 30 percent pay subsidy for their payroll costs. The subsidy is awarded for a varying
time period, depending on the length of young persons previous unemployment. Several TE
offices in Finland have announced that their Sanssi card quotas are already full for the year,
and further funding is unlikely.

One-third of young people are still unemployed after three months, which is too long, Filatov
continues.

Government goal vs reality

Helena Helve of the University of Tampere agrees with Filatov that projects like the Youth
Guarantee are beneficial.

It is a great system, but it doesnt have enough resources be implemented well. There just
arent enough work and internship positions to be had. Young people can become
disillusioned after they become excited about a new opportunity in a training course and then
nothing comes of it, Helve says.

One of the new governments goals is to encourage young people to enter the job market
earlier, after achieving what amounts to their Bachelors degree in Finnish higher education.
In reality, however, the weak employment scene forces many to continue their costly studies
even longer.

A total of 724 million euros have been set aside in 2015 for government funding for subsidy
programmes like the Sanssi card, as well as jobs training opportunities, start-up grants and
other employment services. In proportion to the number of unemployed people who are in
need of the services, however, there is less money available to combat the problem than in
years previous.

Sources Yle

http://yle.fi/uutiset/unemployment_rate_at_10_every_fifth_young_person_without_work/8171703 Page 3 of 4
Government) funded) projects) such) as) Youth) Guarantee) have) been) used) to) try) to) mitigate) joblessness,)
especially) amongst) those) aged) between) =ifteen) to) twenty>four) in) Finland.) Unemployment) occurs) in) the)
economy) where) there) are) workers) who) are) willing) and) able) to) work) but) are) unable) to) =ind) jobs.) These)
programs)aim)to)increase)the)employability)of)young)graduates)but)do)not)target)the)main)problem,)which)
is) the) unavailability) of) jobs) and) internships.) The) most) important) factor) that) is) contributing) to) these) high)
unemployment) rates) is) Finlands) dire) economic) situation.) Although) Finland) is) not) technically) in) a)
recession,) de=ined) as) when) there) are) two) or) more) consecutive) quarters) of) negative) economic) growth,)
growth)is)nearly)inexistent)(France>Presse))and)as)a)result)of)this)slow)economic)activity,)=irms)decrease)
their)demand)for)labour)and)some)may)even)shut)down.)The)low)levels)of)aggregate)demand)(AD))implies)
less)demand)for)labour,)thus)resulting)in)a)high)unemployment)rate.))

As)the)article)states,)the)job)training)opportunities)is)a)great)system,)but)it)doesn't)have)enough)resources)
to) be) implemented) well.) 724) million) have) been) set) aside) this) year) for) government) programs) such) as) the)
Sanssi) card) and) job) training) opportunities,) however) as) more) youths) enter) the) work) force,) this) amount) of)
money) is) insuf=icient.) Additionally,) these) government) subsidies) have) a) large) opportunity) cost,) as) this)
amount)could)be)spent)on)other)implementing)other)policies.)Unemployment)due)to)cyclical)reasons)would)
be) dealt) most) effectively) with) expansionary) demand>side) policies,) as) these) policies) aim) at) increasing) AD.)
The)government)may)implement)loose)monetary)policy.)The)Central)Bank)could)increase)the)money)supply)
and) through) this,) lower) interest) rates.) As) the) cost) of) borrowing) decreases,) AD) is) expected) to) increase)
because)of)the)rise)in)consumption)and)investment)expenditures.)The)lower)rate)of)return)will)also)make)
saving) a) less) attractive) option) so) households) will) tend) to) spend) more.) Investment) spending) by) =irms) will)
also)tend)to)increase)as)borrowing)costs)to)=inance)purchases)of)capital)and)expansions)lower.)As)shown)in)
Diagram)1,)the)increased)expenditure)by)consumers)and)=irms)will)shift)AD)out,)minimising)the)de=lationary)
gap)from)output)gap)1)to)a)output)gap)2,)thus)moving)the)output)level)closer)to)the)full)employment)level.)
Aided) by) the) Keynesian) multiplier) effect,) an) increase) in) government) expenditure) will) lead) to) a) greater)
change) in) output.) A) bene=it) in) using) lowered) interest) rates) is) that) its) =lexibility) and) can) be) used)
incrementally)as)opposed)to)=iscal)policy)where)it)is)dif=icult)to)estimate)the)magnitude)of)changes)needed.)

Average Price Level

AD 1 AD 2 LRAS

Diagram)1:
Increase)in)AD

P
Output gap 2
Output gap 1

Y1 Y2 YF Output (Real GDP)

1
However,)it)is)important)to)note)that)spending)does)not)only)depend)on)interest)rates.)The)slow)economic)
growth) and) rise) in) unemployment) can) adversely) effect) business) and) consumer) con=idence) and) thus)
consumption) and) investment.) Another) measure) the) government) could) also) employ) is) expansionary) =iscal)
policy)in)the)form)of)decreased)taxes)to)stimulate)private)spending.)However,)the)effects)are)more)dif=icult)to)
estimate)because)some)of)the)increase)in)disposable)income)might)be)saved)rather)than)spent.)
) Average Real Wage Rate ()

ASL

Diagram)2:)
Demand>de=icient)
unemployment

We

W1
ADL

ADL2

Q2 Q1 Qe Number of Workers

Diagram) 2) from) above) illustrates) demand) de=icient) unemployment.) Due) to) the) slow) economic) growth,)
aggregate)demand)for)labour)has)fallen)from)ADL) to)ADL2) but)the)real)wage)rate,)however,)is)unlikely)to)fall)
from)We)to)W1)as)wages)are)sticky)downloads)due)to)labour)not)being)a)passive)commodity.)Lowered)wages)
could)also)result)in)decrease)in)productivity)and)motivation)which)could)also)adversely)effect)the)business.)
Unemployment) rates) amongst) the) youths) often) increases) the) most) during) a) period) of) slow) economic)
growth,)as)they)are)they)are)likely)to)be)have)the)least)experienced)compared)to)others)in)the)labour)force.)
Consequently,)they)might)also)become)long)term)unemployed)if)they)are)unable)to)=ind)jobs)and)quickly)lose)
their) skills.) The) inactive) population) refers) to) those) who) are) no) longer) in) the) labour) force,) has) also)
increased,)as)they)have)given)up)on)their)job)search.)The)recent)recession)has)not)only)increased)frictional)
unemployment) but)could) increase) the) rate) of) long) term) unemployment) as) workers) becomes) demotivated)
and)deskilled.))

It)is)necessary)to)use)both)demand)side)policies)and)supply)side)policies)to)combat)unemployment)in)the)
long)term)and)the)short)term.)The)training)programs)and)government)funded)subsidies)can)only)be)effective)
in)reducing)unemployment)if)there)is)suf=icient)aggregate)demand)in)the)economy)to)stimulate)demand)for)
labour.) Thus,) the) government) should) use) expansionary) monetary) and) =iscal) policy) to) stimulate) economic)
growth,)creating)more)job)opportunities.)

"Unemployment) Rate) at) 10%,) Every) Fifth) Young) Person) without) Work.") Yle$ Uutiset.) Yle,) 21) July) 2015.) Web.) 18) Oct.)
2015.)<http://yle.=i/uutiset/unemployment_rate_at_10_every_=ifth_young_person_without_work/8171703>.

France>Presse,)Agence.)"Finland)Revises)Away)Recession,)but)Not)Crisis.")GlobalPost.)GlobalPost,)4)Sept.)2015.)Web.)18)
Oct.)2015.)<http://www.globalpost.com/article/6642690/2015/09/04/=inland>revises>away>recession>not>crisis>.

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