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The macroeconomic issue that affects a governments economy


This essay will discuss a macroeconomic issue that affect to government economy. Understanding this issue is related to understand some general concept about the economic first. What is economic, what it divided to and how it related to government issues. Then after understanding these general ideas will focus on unemployment issue, what it is and how it affect to government economy. After that a comparison between unemployment in Saudi Arabia and unemployment in UK. In order to understand the issue in these countries using an analysis tool in necessary which will be PEST analysis in order to relies the reasons why that issue is important and the reason of it also.

First of all what is economic, economics is a way to find how people lives process in that way which the live now. It is a measurement tool used by economics to know more about how people live. Also to find out the influences of some factors that could change these process to be better.

Economics is mainly contain two part which are Macroeconomic and Microeconomic, and each part is focus on different way of study area. Macroeconomic is a field of study which related to governmental issues economy or globally and how economy fluctuate. The purpose of study macroeconomics in to understand and be able to analyze some issues such as national income, unemployment, inflation, rate of growth and price level. On the other hand, Microeconomics is discuss people decisions which related to the market. The aim of study Microeconomics is to define services and goods quantity and price, and also to discover the effect of government rules and taxes to the goods and services price, as an example of what Microeconomics study are cars prices and demand, telecom and electricity.

In this essay will discuss one of Macroeconomic issue in two different countries which are Saudi Arabia and UK. The issue will focus on is unemployment, and the reasons of this issue. Then considering how it affect to the government economics. According to Donald Rutherford in his book Dictionary of Economics, he define unemployment as " the stat of being part of a labor force, wanting to work, but without a job".( Rutherford, 1992, p. 473)

Unemployment is defined as person who is available to work, looking for a job and does not have a job now. And some countries add more conditions to define person as unemployment, such as in Saudi Arabia mention that the person account as unemployment if the previous conditions apply on him and he accept the minimum rate of salary. And in UK they define unemployment as " In the United Kingdom the definition of unemployment is someone who is in receipt of the jobseekers allowance" (Parkin et al , 1997).


Unemployment is a major problem that could affect to government economy, there are different side of that affect. Unemployment could affect to government policy, social relationships between people, economic growth, productivity and technology development. In this essay will use a tool to analyze this issue through the chosen countries and how it affect.

PEST Analysis.

PEST analysis based on four factors which are :

Political : and it consist of governmental regulations and laws, government type and political change.

Economic : which consist of growth, labor supply and labor costs.

Social : and contains population growth, health and education.

Technology : contain impact of technology and productivity.

Unemployment in the United Kingdom.

Unemployment in the UK actually is not a new problem or happen recently it started years ago and it fluctuated in high percentage to low percentage during 1855 to 1994.

According to C.H.Feinstein, he mention that the percentages of unemployment in the UK changed from time to time. It reach the highest percentage in 1935 where it was 15% and almost 0% during 1945. Both of them have it own political reasons at that time.


There are many reasons that leads to unemployment, first political reasons: government always centralize the governmental organizations and businesses to be inside the big cities and rather than smaller one or rural side which affect that most people leave these village and move to live in big cities. And that’s affect to most businesses and market be only in big cities and then this country lose one or more of public sectors like education for example, and that what happen in the UK actually. Most of population be in big cities and the most of universities opened in big cities, then it will lead to lack of knowledge between people who lives in these places and cannot offer to let their children to lean in cities cause of expensive.


Also there are economics reasons for unemployment in the UK, labor market are always linked with economy of these country. For example, the salary for employee in a rich country is different than other who could do the same job but in poor country. Employee lose their motivation to work because of the low payment and that affect to the company or organization productivity.

Another economic reason of high percentage of unemployment is the credit crunch. Since the credit crunch happen and most of companies affected of it, they try hard to adjust their balance and the only way to do that is end a lot of their employee contract. The next chart shows that the percentages of unemployment is start to increase sharply when the world affected by credit crunch.


Also the technology affect to spread the unemployment in United Kingdom in different ways. A lots of companies nowadays work hard to introduce machines to their company instead of human. The companies managers have their own point of view, the managers think that these electronic machines work more than the humans and at that time the productivity of the company will raise tribal. The human employee work 8 hours daily but these machines could work without break time or stop during 24 hours. Also the costs of this machines is lower than human and for future the expenses will reduce and the profit will increase and that what private sectors looking for. The new generations of robot employee will increase the rate of unemployment in UK.


Lora a student in a university were graduate recently from a law school. She works hard to find a job in a lawyer office, but unfortunately for her she graduate when the percentage of unemployment is high. As she not born in a rich family and cause of shortage of money she works in a clothes shop. Years after another trying hard to find a job that she looking for, but after a while she find herself stuck in the clothes shop because she cannot compete the new graduates law students.

Previous example is shows how can unemployment affect socially, Lora found a solution for her problem in her way but others could not handle the unemployment like Lora. Rises of crime, alcoholism and violence are reflect of people who are jobless and have nothing to do. People who are unemployment and deal with this situation in wrong way by dealing a drug for example, easy money will be in their hand and they will never think of find a job but they will act in different way to try hard to make the worker be addict and then they will be a jobless cause they cannot do their job in the right way.

If the unemployment increase the social problem will increase as will.

Unemployment in the Saudi Arabia.

Unemployment in Saudi Arabia in a new problem actually, the government did not face that huge increasing in unemployment like what happen recently. Unemployment rate in Saudi Arabia reach the highest percentage in Dec 2009 when reach almost 10.5 % , where the lowest percentage was during 1999 when reach 8.1 %. There are many reasons that affect to the unemployment to raise in Saudi Arabia.


Because of Saudi Arabia more than 50 % of its total area are desert, government did not make much effort to consider that the people who live in these areas are jobless. There is no industries inside these areas and those people who lived in desert which named Bedouins most of them are unemployment. They did not study or finish their graduation year cause of their culture enforce them to stay in their land to implant or raising camel through their childhood. They grown up and the time is change and they cannot depend on what their father used to do, but also they are not capable to work cause of lack of education.


Saudi Arabia are like all other countries which affected by credit crunch, but because of the government regulations the private organizations cannot fired these employee before their contract will end. Then they companies use different way to reduce the number of the employee by adding more work to do for them. Actually that idea reduce the employee because most of them resign from work and also the company save more money than they expect. Many organization do that strategy and number of unemployment raise.

Another reason of high percentage of unemployment is foreign labor. Some company hire a foreign labor cause of low cost of them and the high skills or professional employee can costs nothing comparing with local employee and with high experience in foreigner side.


Technology is important in any organization in different way especially in industrial sectors. And because there are no much Saudis skilled employee who can work in these sectors, the organizations replace hiring Saudis with foreigner. Most of Saudis cannot handle to use technology in their work, not at this time actually, that raise the percentage of unemployment. Companies always looking to professionals in a way of reduce the cost of labor by using technology.


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