WHEN UNEMPLOYMENT HITS HOME

ECO Cafe

I know the feeling of Monday blues and the sense of relief at the end of the week. A common expression is, "Thank God, it's Friday." After all, when was the last time you heard someone say, "Thank God, it's Monday"?

But now you should probably count yourself among the lucky ones if you can still say things like, "Thank God, it's Friday." It means you still have a job to get bored with.

This year, more than 50 million jobs worldwide could be lost as a result of the global financial crisis. The latest International Labour Organization (ILO) report revealed that the global unemployment rate could rise as high as 7.1% in 2009, compared to 6% in 2008. What is worrying is that the consequences of the global crisis could come knocking on your door. What was the global economic crisis last year could easily become a global social crisis this year.

The labour market has posted a sign of significant weakening along with economic growth. After four consecutive years of decline, global unemployment increased by 10.7 million people between 2007 and 2008, the biggest year-on-year rise since 1998. For those who manage to keep a job, earnings and other employment conditions are expected to deteriorate. The number of working poor, or people earning less than US$2 per day, may increase to 1.4 billion, or 45% of the world's employed population.

Compared with the rest of the world, though, Asia is still faring well under economic pressure. The lowest unemployment rate in 2008 was 3.8% in East Asia, followed by 5.4% in South Asia and 5.7% in Southeast Asia and the Pacific. Thailand's unemployment is even lower than the region's average, with its rate registered at 1.4% last year.

But we shouldn't be too happy with the low figure. The ILO defines the unemployed as people without work, who are currently available for work and seeking work. The main criterion for being employed is formal job attachment, not the main activity. Consequently, to be defined as employed, it is enough to work for at least one hour or to be temporarily not working but with a formal job attachment.

Although the unemployment rate may be a useful indicator reflecting the general performance of the labour market, it should not be interpreted as a measure of economic hardship. For example, in 1998, one of Thailand's worst years in terms of economic performance, unemployment was only 4.4%. And last year, while most countries' unemployment rate was above 5%, Thailand's unemployment was much lower.

High unemployment rates can occur in countries with significant economic development and low levels of poverty. With advanced social protection schemes, people in these countries can afford to take the time to find more satisfying jobs. In countries without a social safety net, people simply cannot afford to be unemployed. So they usually try their best to look for jobs, such as in informal work arrangements. What is important, therefore, is not the unemployment rate per se but the changes over time in the rate.

Economists often distinguish between various types of unemployment. Cyclical or Keynesian unemployment refers to unemployment that rises during economic downturns and falls during the upturns. In other words, it varies with the business cycle. This type of unemployment happens when there is not enough aggregate demand in the economy.

Frictional unemployment occurs when a worker moves from one job to another, or is searching for a new one. If the search take too long, the economy could suffer as work will not get completed. Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. In this case, even if jobs are available, unemployed workers may not have the skills needed for the jobs or are in the wrong part of the country to take up the job offered.

Economists hold different views regarding policies to address unemployment. Monetarists, for instance, think that controlling inflation should result in increased employment in the long run. On the other hand, Keynesians stress the importance of stable business cycles by managing aggregate demand.

At this point, we do not know yet how bad the recession and unemployment situation will turn out to be. Given that the recent global growth projection was adjusted downward to 0.5% in 2009 (IMF), its lowest since World War II, we may need to be prepared for our jobs no longer being secure.

Being unemployed, though, does not mean that you are not good enough. It just means that not everyone can be a great stockbroker, and not every great stockbroker can be a great scientist, doctor, accountant, musician or economist.

Each one of us is good at something. If unemployment hits your home, you should not be disheartened but take the opportunity to reassess what kind of work you really like to do. When opportunity returns, you will then be able to choose the most satisfying job that reflects your true talent.

Dr Tientip Subhanij holds a PhD in economics from the University of Cambridge, and currently has a career in banking as well as academia. She can be reached at tien201@yahoo.com