According to the OECD, harmonized unemployment rate is the umber of unemployed people expressed as a percentage of number of people employed plus unemployed. Further, the International Labor Organization defines unemployed persons as those that are currently not working but are looking for work because they are able and willing to work (Index Mundi, 2012). The Index defines inflation in consumer prices as percentage change in those prices with those of the previous year. Figure I shows the relationship between unemployment and inflation in the UK. Figure II unemployment rates from 1998 to 2009 for UK alone while Figure III shows inflation alone in the same period of time. Figure IV is a tabulated and extended version of the graph in Figure II.
Recent statistics show that there are no extreme trade offs between inflation and unemployment in the UK as it was in the recent past. According to Higson (n.d.), reforms in the supply side has led to the expansion of the UK economy without necessarily experiencing inflation. Reduced inflation has been attributed to labor market improvements through immigration. This has continued to ease pressure in the labor market. Further, reduced inflation could be attributed to independence of the Bank of England in reducing the expectations of inflation and ‘weakening the link between current and future inflation’ (Higson,n.d.; p. 139). Moreover, between 2007 and 2009, Philip’s Curve showed that unemployment was rising while inflation was falling. But between 2009 and 2011, both unemployment and inflation generally rose.
By the start of 2012, the UK inflation rate was at 4.8%. However, it was expected to drop to 4.2% by the end of the year. According to The Source (2012), this drop was attributed to a dip in food and energy prices. However, the past few years have seen a continuous fall in wages and increased prices of food. That was one of the things that contributed to the rise in inflation. By the end of 2012, it was expected that unemployment rate would increase to 8.4% as opposed to 8.3% in October the same year. Additionally, it is envisaged that the number of the unemployed people in the UK would reach 3 million by mid-2013 (The Source, 2012). This would represent 9.3% of the labor force.
On the other hand, Kazakhstan recorded an unemployment rate of 5.8% in 2010 and 5.4% in 2011 (Index Mundi, 2012). However, these were estimates. As per Figure V, the unemployment rate from 1994 has been recorded. In other words, unemployment was expected to fall in 2011 from 2010 estimates. This is contrary to what was expected in the UK in the same period of time. With regard to Kazakhstan, the rate of unemployment as at that time was less that that of UK. It will be demonstrated that during the same period of time, the UK rates were 7.8% and 8.1% respectively. Moreover, these were also estimates. But generally, in 2011, unemployment in UK was higher than that in Kazakhstan. In addition, the 2011 rates for Kazakhstan were a reduction from the previous year while those of the UK were an increase from the previous year, 2010.
Statistics from CIA World Factbook cited in Index Mundi (2012) show that the estimated unemployment rates in the UK in 2010 and 2011 were 7.8% and 8.1% respectively. In terms of age group, the total unemployment rate for ages 15-24 was 18.9% in 2009 with that of males and females as 21.7% and 15.6% respectively. With regard to consumer prices, inflation rates were 3.3% and 4.5% in 2010 and 2011 respectively.
There is no doubt that Kazakhstan has different economic policies from the UK. This is why there are differences in the figures. The geographical, religious, environmental and fiscal situations are quite different in the two counties. Most importantly, Kazakhstan has a completely different demographic profile from that of the UK (Desai, 1997). By considering the age-group 15-24, Kazakhstan recorded unemployment rate of 6.7% in 2008. While the male unemployment rate was 6.8%, that of the females was 8.2%. Again, these figures were lower than those of the UK the following year 2009. Although the comparison was not based on the same year, it is not likely that the difference could be offset within 1 year. Moreover, as it had been pointed out, Kazakhstan’s demographics, that is population size and structure among others, are different from those of the UK.
According to The Economist (2013), UK living standards have been reducing for the last five years. This year, average wage earning dropped to 1.4% from 1.7% towards the end of last year. In addition, unemployment fell. This was realized when the number of people applying for jobseekers allowance fell dramatically. The Economist envisaged that inflation rate is at 2.7% and is set to remain above 2% for in the next few months of 2013. The UK Office of National Statistics recorded 2.49 million people as unemployed while the employment rate remained at 71.4%. The manufacturing sector and the labor market are likely to push unemployment up this year.
According to Trading Economics (2012), Kazakhstan’s unemployment rates remained at 5.3% by end of December 2012. This rate was the same for the previous month. The Agency of Statistics for Kazakhstan notes that from 2003 to 2012, the rate of unemployment averaged at 6.42% with the highest in March 2003 at 9.7% and lowest at 4.4% in December 2011. These rates are lower than the UK ones.
Although unemployment was lower in Kazakhstan than in UK, the former recorded higher inflation rates than the UK in 2010 and 2011. According to Index Mundi (2012), the estimated inflation rates for Kazakhstan’s consumer prices in 2010 and 2011 were 7.1% and 8.4% respectively. This is far higher than the UK rate of 2.7%. Therefore, this indicates that UK’s fiscal policy focuses on expansion of economy without necessarily experiencing high inflation rates. Another difference is that while the rates in UK are likely to remain relatively low, Kazakhstan is bound to experiencing not only high but also increasing inflation rates moving forward. Historically, as it is shown in Figure VI, Kazakhstan is bound to high inflation rates for consumer goods.
In a further attempt to explain the differences in inflation rates for consumer goods in the two countries, there is a need to investigate the role of the Central Banks in these countries. The National Bank of Kazakhstan has a tendency of printing currency for local use (Di Tata, 2005). This increases the supply of money in the market and also leads to decreased real interest rate. Increased money use leads to high demand for goods because citizens can buy more. On the other hand, UK’s economy is driven by market forces. In addition, there is a higher level of production in the UK and capital value as opposed to Kazakhstan.
According to Trading Economics (2012), Kazakhstan recorded an inflation rate of 6.6% in January 2013. Historically, the highest inflation rate in the country was 2960.8% in 1992. From 1992 to 2013, this brings an average of 81.1%. Perhaps the lowest rate was in 1998 when the country recorded an inflation rate of 1.98%. The UK has also ever recorded inflation rates of less than 1% in the first quarter of 2000.
In conclusion, the causes of inflation and unemployment in the UK are very different. These are based on the fiscal policies if the two countries as well as the manufacturing sector. UK focuses on expansion of economy at little inflation while Kazakhstan focuses more on local currency need thus creating high inflation.