Recession can be defined as general economic decline. It involves contraction in the Gross Domestic Product (GDP) for a period of six months or more. During this period, the economy is characterized by high rates of unemployment, stagnation of wages and general fall in sales. Recession does not usually last longer than a year. Recession relates to what a country produces for the market and its demand. This means that consumers cut down their consumption rates of goods and services (Nagle, 2010). This is when the economy of a country recedes from the normal way of buying and selling patterns. Unemployment is the percentage of civilian work force that is out of jobs.
Effects of Recession and Unemployment on Adults in an economy
Recession has adverse effects on the general economic performance of an individual country. It results into many workers who are nearing retirement or those already retired to miss out in the pension plan that normally provide a fixed monthly income. This results in complete cut off in normal household expenditures. The results are very devastating to older workers (Brezina, 2011).
According to Majmundar (2011), financial constraints associated with recession make some older workers to return to jobs where they have to compete for same responsibilities with the young who are energetic and educated. In extreme cases some are laid off through forced retirement as most organizations cannot meet their needs as result of reduced scope of operation. On the other hand, those unemployed face prolonged unemployment period. This is really disturbing to individual families because the impacts are felt all over and world wide. Infact, older people with limited financial resources and time to build their lives are compelled to live below the poverty levels. Recession makes it hard for parents to provide enough for their children. Fees become very hard to provide and other house hold needs.
The recent witnessed violence in major world cities was as a result of recession effects. Recession is associated with crime as people are using all means to survive (Townsend, 1984). Many emerging adults find it hard to find meaningful jobs and keeping those hard gotten jobs because they lack relevant work experience and social connections with the older workers in those positions.
Young people are the worst hit by recession. It is very difficult for the youth to get meaningful jobs and most of them turn to criminal activities as the last option of survival. There are high rates of unemployment among the young and as a result, there is a bigger downfall in hourly wages. This is a very serious condition as it makes people susceptible to malnutrition, mental stress, loss of self esteem, illness and may lead to depression. Therefore, it is evident that effects of unemployment are much greatly felt in the young people than the older ones. The more a young educated person stays for long out of job market, the more it becomes hard to find a job and in future, this has impact on wages.
Remedy for Unemployment and Recession.
The government can decide to use fiscal policies to curb recession. This involves the use of the national budget; to directly affect aggregate demand in the economy. The government also can use monetary policies in tackling recession.
Governments ought to come up with policies aimed at reducing high levels of unemployment. The most pressing issue here is how to reduce efficiently the high levels of unemployment. It is argued that the only way to create a substantial fall is by creating conditions necessary for a new period of substantial and sustained economic growth. It is argued that protectionism could be the way forward in creating these conditions. It is also essential to establish a more efficient economy where competition is encouraged and the adoption of essential monetary policies (Tuppen, 1988).
It is also very essential that key structural policies be implemented to improve on the prospects of productivity and promote economic growths. It involves strengthening of innovative performance, widening of the single market, opening of markets and making some effort to a carbon free economy. In other words reducing the amount of carbon emission in the atmosphere as this triggers adverse environmental impacts in the world. Reforms in these areas will not only promote long term economic growth, but also promote and encourage conditions that favor economic progress in other economic areas directly. For instance, competitive market would enhance business productivity and growth. It will also offer incentives for innovations and development. This is an essential element in boosting workforce and development of human capital.
Capital Account Convertability
This is a government policy meant to simplify the process of currency exchange where by the rate of change is determined by supply and demand. It is mostly used in the balance of payment of a nation. Capital accounts convertability is introduced after a certain lapse period. It is meant to allow easy inflow of foreign capital. This is done under certain conditions to enable investors repatriate their investment. This policy has to be monitored carefully, because if not, it could lead to flight of a country’s capital.
Exchange control is necessary in improving the balance of payment, limitations or restriction of imports that are considered inessential. It facilitates importation of items that I would refer to as priority items, controlling capital outflows and maintaining a stable value of the currency.
Import induced recession is well managed by exchange rate control. This involves pursuing of domestic policies that are of anti deflation in nature. Therefore, domestic programs are well guarded by this policy. This policy when instituted protects domestic markets from international competition. The aim here is to create and maintain the available job opportunities hence reducing unemployment (Cherunilam, 2008).
Lowering of lending rates
This is yet another measure aimed at controlling recession. Advice by the Central Bank to commercial banks to effect this would ultimately result in increased borrowing of loans by individuals and institutions. Loans borrowed would be invested into the economy resulting in job creation for a number of people. Injection of funds into the economy would generally change economic situations as more and more institutions would be encouraged to borrow funds for economic development and growths.
Recession as seen early can be handled effectively by respective governments if they mean to. It should be noted that human influence in demand and supply is directly related to recession in an economy. Acceptance of excessive foreign currency into a country creates such situation making importation of essential items very expensive and general sky rocketing of prices of goods and services. This leads to many companies to cut down production rates due to high costs of production involved.
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