First of all, we need to know
What is Unemployment?
Unemployment refers to people who are employable and actively looking for work but are unable to find work. This category includes people who are in the labor force but do not have suitable jobs. Unemployment is one of the indicators of a country's economic status and is usually measured by the unemployment rate, which is calculated by dividing the number of unemployed people by the total number of people in the labor force.
Understanding Unemployment
The term "unemployment" is frequently misunderstood because it includes people who are waiting to return to work after being discharged but excludes people who have stopped looking for work in the last four weeks for a variety of reasons such as leaving work to pursue higher education, retirement, disability, and personal issues. People who are not actively looking for work but want to work are not considered unemployed.
People who have not looked for work in the last four weeks but have actively sought one in the previous 12 months are classified as "marginally attached to the labor force." Within this category, there is another called "disappointed workers," which refers to people who have given up looking for work.
The categories mentioned above can sometimes lead to confusion and debate about whether the unemployment rate accurately represents the actual number of unemployed people. To gain a full understanding, contrast "unemployment" with "employment," which the Bureau of Labor Statistics (BLS) defines as individuals aged 16 and up who have recently put hours into work in the past week, paid or unpaid, due to self-employment.
Types of Unemployment
There are four types of unemployment: (1) demand-deficient unemployment, (2) frictional unemployment, (3) structural unemployment, and (4) voluntary unemployment.
1. Demand deficient unemployment
Demand deficit unemployment is the most common cause of unemployment during a recession. When a company's demand for its products or services falls, it responds by cutting back on production, necessitating the reduction of its workforce within the organization. Workers are effectively laid off.
2. Frictional unemployment
Frictional unemployment refers to those workers who are in between jobs. An example is a worker who recently quit or was fired and is looking for a job in an economy that is not experiencing a recession. It is not an unhealthy thing because it is usually caused by workers trying to find a job that is most suitable for their skills.
3. Structural unemployment
Structural unemployment occurs when a worker's skill set does not match the skills demanded by the jobs available, or when workers are available but unable to travel to the geographical location of the jobs.
A teaching job in China, for example, may necessitate relocation, but the worker may be unable to obtain a work visa due to visa restrictions. It can also occur when a technological change occurs in the organization, such as workflow automation, which eliminates the need for human labor.
4. Voluntary unemployment
Voluntary unemployment occurs when a worker decides to leave a job because it is no longer financially viable. As an example, consider a worker whose take-home pay is less than his or her cost of living.
Causes of Unemployment
Unemployment is caused by a variety of factors originating on both the demand side, or the employer, and the supply side, or the worker.
High interest rates, a global recession, and a financial crisis could all lead to demand-side reductions. Frictional unemployment and structural employment are important supply factors.
Effects
Unemployment has an impact on both workers and the national economy, and it can have a cascading effect.
Unemployment causes financial hardship for workers, affecting their families, relationships, and communities. When this occurs, consumer spending, which is one of an economy's key drivers of growth, falls, potentially leading to a recession or even depression if not addressed.
Unemployment reduces demand, consumption, and purchasing power, resulting in lower profits for businesses and budget cuts, and workforce reductions. It starts a vicious cycle that is difficult to break without outside intervention.
Long-term Unemployment vs. Short-term Unemployment
Long-term unemployment is defined as unemployment that lasts more than 27 weeks, even if the individual has looked for work in the previous four weeks. For obvious reasons, its effects are far worse than short-term unemployment, and the following are some of them.
- 56% of long-term unemployed people reported a significant drop in their net worth.
- Long-term unemployment does not only cause financial problems; 46% of those in this situation report having strained family relationships. This figure is higher than the 39% who were not unemployed for as long.
- Another 43% of long-term unemployed people said it had a significant impact on their ability to advance in their careers.
- Unfortunately, long-term unemployment caused 38% of these people to lose their self-esteem and 24% to seek professional help.
Final Word
Unemployment is a serious social and economic issue that has a huge impact on everything but is frequently overlooked. A more robust system of assessing unemployment should be implemented in order to better understand its causes and how to address them.
Hope This Blog Helpful to you
Thank You
0 Comments