news page compass On November 18, 2022, it was announced that the Ministry of Manpower had set a 10% increase in the maximum UMR by 2023. On the one hand, this policy was a supportive community need. As the price of daily necessities continues to increase with the increase in fuel prices.
but vice versa That means increased salary costs for companies and employers. Moreover There is a possibility of a recession in 2023 under these conditions. It is impossible for operators to reduce the number of workers. if this happens There will be a cyclical increase in unemployment (Unemployment is cyclical.).
Definition of Cyclic Unemployment
Cyclical unemployment is unemployment that occurs due to changes in economic cycles. Unemployment is cyclical.This type of unemployment is often referred to as collective unemployment.
just like a business A country’s economy also has a cycle of increasing (boom, expansion) or decreasing (recession, contraction). This type of unemployment usually occurs when the country’s economy experiences a recession.
while it is happening economic recessionThe number of requests for the company’s products will decrease, resulting in lower revenues. to control this In general, companies will reduce costs Including salary costs by laying off a number of employees Employees affected by layoffs are known as cyclical unemployment.
Although the economic ups and downs are normal. But if the recession (recession) is allowed to continue without government protection, It is not impossible for a recession to lead to depression.
in a recession Economic growth may be -0.3% to -5.1%, but in a recession. Economic growth could be 14.7%-38.1%, that is, the economic downturn is worse than the recession.
An example of cyclical unemployment.
1. Cyclic Unemployment in the United States
As the world’s most advanced economy, the United States has traceable unemployment data. Crisis of 1929. According to information submitted by The balance moneyDuring the crisis, the unemployment rate rose from 3.2% in 1929 to 8.7% in 1930.
At its peak in 1933, the unemployment rate in Uncle Sam’s country soared to 24.9%, meaning 1 in 4 workers in the United States was jobless. Until now, this ratio remains the highest unemployment ratio in the United States.
Although not as high as during the Great Recession. But the increase in unemployment in Uncle Sam’s country in 2008-09 and 2020 is also huge. Due to the financial crisis and recession caused by the Co-19 pandemic. during the financial crisis The unemployment rate rose from 5% in 2007 to 9.9% in 2009 during the pandemic. The unemployment rate rose from 3.6% in December 2019 to 14.7% in April 2020.
2. Cyclic Unemployment in Indonesia
Not just the United States Indonesia also experiences a cyclical increase in the number of unemployment. Both during the 1998 financial crisis and during the recession during the COVID-19 pandemic 24 years ago, the unemployment rate in the country rose from 4.69% in 1997 to 6.36% in 1999.
This unemployment rate is still lower compared to during COVID-19. with the lockdown of many cities in Indonesia Many companies are unable to operate and are forced to lay off employees. As a result, the unemployment rate increased from 5.23% in August 2019 to 7.07% in August 2020.
In 2023, this ratio is likely to rise again after falling to 5.86% in August 2022 as many well-known tech companies such as GoTo have laid off some staff due to pressure from the international economy.
The causes of unemployment are cyclical.
Cyclic unemployment is often caused by a decline in people’s purchasing power. inflation Rising too high will put pressure on the purchasing power of people and companies. for the community This drop in purchasing power will allow the belt to be tightened and only shopping for basic necessities.
For companies, the effect is two-fold. First, people’s attitude to buy only the basic needs will increase the demand for the company’s products. Secondly, an increase in the price of staple goods will cause employees to ask for a price increase. As a result, the cost of salaries to be paid by companies will increase.
to overcome this Companies need to reduce costs by reducing production or reducing the number of employees. As a result, many workers had to be laid off.
Companies typically wait and observe macroeconomic conditions before they start laying off workers. The goal is to predict whether the coming recession will be severe. It is not often that a wave of layoffs occurs. The macroeconomic conditions have entered a recession.
The negative effects of unemployment are cyclical.
Macroeconomic and microeconomic variables are interrelated. Although it is caused by people’s purchasing power declining. But cyclical unemployment could exacerbate the decline in purchasing power.
because unemployment will cause anyone to reduce costs as well, so if allowed to continue without intervention from the government This cyclical unemployment could exacerbate the recession.
The number of unemployed in the United States in 1933 never touched 24.9% for no reason. from information from multiple parties This was due in part to the unwillingness of then President of the United States, Herbert Hoover, to intervene in the economy.
according to Hoover Like many people in the United States at that time, who adopted a free market economy, the market (market) would “heal” itself, so government intervention had to be kept to a minimum. However, Hoover’s estimate was wrong. Uncle Sam’s country continued to deteriorate from 1929-1923.
Franklin Delano Roosevelt (FDR), who became president after Hoover pursued a policy contrary to the New Deal he launched. Not only increased government intervention in the economy so that the country’s economy can recover from the crisis. It also creates a new understanding of how macroeconomics should operate and the role of government in the economy.
How to overcome cyclical unemployment
Simply put, a sustained increase or cyclical unemployment can be stopped by enforcing expansionary economic policies. First, the government can lower the benchmark interest rate and ease the credit repayment process. for companies can get additional cash flow for their business
If this expansionary monetary policy is not enough The government can pursue an expansionary fiscal policy. Expanded fiscal policy was slow to implement. This is because the government is required to submit the State Revenue and Expenditure Budget Plan (RAAPBN) to the DPR first.
This expanded fiscal policy program takes many forms, such as direct cash assistance (BLT), labor-intensive programs, tax rebates, and others.
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