Unemployment
Unemployment is a term referring to individuals who are employable and
actively seeking a job but are unable to find a job [1]. It does not include
stay-at-home parents, retirees or students.
Types of unemployment
Structural unemployment is a form of involuntary unemployment caused by
a mismatch between the skills that workers in the economy can offer, and
the skills demanded of workers by employers.[2] It remains for long periods
and is caused due to technological changes, government policies or
competition.
Frictional unemployment is a type of short-term unemployment that occurs
when workers look for new employment or transition out of old jobs and
into new ones.[3] This could occur due to seasonal employment patterns,
geographic mobility and voluntary transition.
Cyclical unemployment is tied with business cycles and fluctuation in the
overall economy, the downturns lead to a less demand of goods and
services which increases the job loss.
Seasonal unemployment is caused when people are unemployed during
certain time periods of an year because of the environment and natural
cycles.
FACTORS RELATED TO UNEMPLOYMENT
Economic factors:
Economic factors significantly influence unemployment levels. Fluctuations in the
business cycle, technological advancements, globalization, labour market
regulations, and skill mismatches all play a role.
Demographic factors:
Demographic factors also play a crucial role in shaping unemployment rates.
Population growth rates, particularly in relation to job creation, have a significant
impact on unemployment levels. Additionally, the age structure of the population,
including trends such as an aging workforce or a youth bulge, can influence labour
force participation rates and overall unemployment figures.
Social & Cultural factors:
Social and cultural factors are important determinants of unemployment rates.
Education and skill levels greatly impact employability, with higher levels of
education often correlating with lower unemployment rates. Moreover, factors
like geographical mobility, influenced by housing affordability and transportation,
can affect individuals' ability to access employment opportunities.
Government policies:
Government policies, including unemployment benefits and job creation
initiatives, play a vital role in mitigating unemployment. These measures influence
job seekers' incentives and enhance workforce skills to address unemployment
rates effectively. Additionally, monetary and fiscal policies aim to stimulate
economic growth and reduce unemployment during downturns.
CONSEQUENCES OF UNEMPLOYMENT
1. Financial Difficulties: This leads to a lack of regular income, making it
difficult for individuals to meet their basic needs and sustain a decent
standard of living.
2. Reduced Purchasing Power: It decreases personal purchasing power,
as individuals have limited or no income to spend on goods and
services.
3. Social Stigma and Psychological Impact: It can result in social stigma
and a sense of social exclusion. Individuals may face criticism, low selfesteem, and psychological stress due to the inability to find work.
4. Increased Inequality: The lack of job opportunities and income
disparities can widen the gap between the rich and the poor, leading to
social unrest and dissatisfaction.
5. Brain Drain: Qualified professionals may seek employment
opportunities abroad, causing a loss of skilled workforce and hindering
the country’s overall development.
6. Social Unrest: Frustrations arising from a lack of jobs can manifest in
protests, strikes, and demonstrations, demanding better employment
opportunities and government intervention.
7. Economic Burden: The government has to bear the burden of
providing social welfare programs, unemployment benefits, and job
creation initiatives. Additionally, the loss of productive human capital
hampers economic growth and development. [4]
RATE OF UNEMPLOYMENT
The unemployment rate is the percentage of the labor force without a job.
It is a ,lagging indicator meaning that it generally rises or falls in the wake
of changing economic conditions, rather than anticipating them. When the
economy is in poor shape and jobs are scarce, the unemployment rate can
be expected to rise. When the economy grows at a healthy rate and jobs
are relatively plentiful, it can be expected to fall.[5]
The 2023 global unemployment rate stood at 5.1 per cent, a modest
improvement from 2022 when it stood at 5.3 per cent.[6]
SOLUTION:
Indeed, implementing a multifaceted approach is crucial in addressing
unemployment effectively. By adapting industrial techniques to match
market demands, adjusting policies to mitigate seasonal unemployment,
and reforming the education system to align with industry needs,
opportunities for employment can be expanded. Strengthening employment
exchanges and providing support for self-employed individuals can also
enhance job prospects. Emphasizing full and productive employment,
increasing production rates, and prioritizing employment programs further
contribute to tackling unemployment. Additionally, managing population
growth can play a vital role in addressing the long-term sustainability of
employment opportunities in the country. These measures, when
implemented in conjunction, can foster a more resilient and inclusive
economy with reduced unemployment rates.
Sources1.https://corporatefinanceinstitute.com/resources/economics/unemployme
nt/#:~:text=What%20is%20Unemployment%3F,not%20have%20an%20ap
propriate%20job.- corporate finance institute
2.https://en.wikipedia.org/wiki/Structural_unemployment- Wikipedia
3.https://www.investopedia.com/terms/f/frictionalunemployment.asp#:~:text
=Frictional%20unemployment%20is%20the%20result,workforce%20contri
bute%20to%20frictional%20unemployment.- Investopedia
4.https://www.nextias.com/blog/unemployment/#:~:text=What%20are%20th
e%20Effects%20of,in%20social%20unrest%20and%20crime. - Nextias
5.https://www.investopedia.com/terms/u/unemploymentrate.asp –
Investopedia
6. https://www.ilo.org/global/about-theilo/newsroom/news/WCMS_908068/lang-en/index.htm#:~:text=The%202023%20global%20unemployment%20rate,s
tood%20at%205.3%20per%20cent.- ILO
BY- Rishit Ranjan