The Influencing Factors on Unemployment Level - The Case of Albania

Abstract

Research background: The empirical studies in labor market indicated that there are many factors that affect unemployment. These studies have analyzed these factors and concluded that exist a mutual relationship between them and unemployment. The relation between employment and FDI were studied by Craigwell (2006) and Karlsson et al. (2009). The effects of minimal wage on employment were studied by Katz and Kruger (1992) and Card (1992a) as well as Stephen Machin and Alan Manning (1994). Card, D. and Krueger, B. (1994) analyzed the effects of minimum wage raise, on fast-food restaurants in New Jersey and Pennsylvania. On the other hand, Neumark and Wascher (2000) in their findings explained that raising the minimal wage by 10 percent reduced the teenager employment rate with 1-2 percent and brought the reduction of total employment by 1.5-2 percent. Meanwhile, Grossberg and Sicilian (2004), found mixed results in their estimations of the minimal wage effects on employment duration period. Krugman, P(2015) one of the economy nobelist defends the theory of raising the minimal wage as a condition for improving the wellbeing. W. Phillips, (1958) studied a negative inverse relation between unemployment and inflation. Barro (1995), De Gregorio (1994), Bruno (1994) concluded that low inflation is accompanied by economic growth and higher employment level. Purpose of the article: The main aim of this article is to study and analyse factors affecting unemployment levels, because the unemployment is a critical problem in our country. We have analyzed the mutual effect of selected factors on unemployment level. The selected factors are FDI, domestic investments, inflation and minimal wage. Methodology/methods: To calculate the impact of this factors on the unemploymentlevel was used time series data for the period 1995 – 2013. Relying on time series data was made regression analysis using SPPS-21 program. Findings: Based on the testing results, we conclude that FDI, domestic investments and inflation affect negatively the unemployment level and this effect is statistically important, whereas the minimal wage has a low positive effect but such effect is not important.