Unemployment

Outline
Introduction

Unemployment

CAUSES FOR UNEMPLOYMENT

IMPACT OF UNEMPLOYMENT

CHALLENGES TO GOVERNMENT

Conclusion

Introduction
The economic welfare of any country depends on the rate of the economic growth. There are
several determinants or the factors for the economic development of a country like
industrialization, agriculture, population, employment etc., one of the major indicator for the
economic growth is employment rate, as it has an adverse impact on the whole economy.
Whenever there is high degree of employment rate the production improves thereby increasing
the standard of living (Anderson, 2006).

High unemployment rate in a country leads to social and economic problems in the community
as a whole. Economic problems result in less production of goods and services, less distribution
of income, loss of tax revenues, fall in GDP rate etc. (www.economywatch.com). Social problems
cause’s social ills and shows effect on individuals financially and psychologically. Individuals
cannot meet their financial obligations on time and getting high stress which leads to problems
like ill-health, premature death, suicides etc. (Clark, 2003)

UNEMPLOYMENT
Unemployment generally defined as the number of persons (It is the percentage of
labor force depends on the population of the country) who are willing to work for the
current wage rates in society but not employed currently. Unemployment reduces the
long run growth potential of the economy. When the situation arises where there are
more other resources for the production and no man power leads to wastage of
economic resources and lost output of goods and services and this has a great impact
on government expenditure directly (Clark, 2003).
High unemployment causes less consumption of goods and services and less tax
payments results in higher government borrowing requirements. The impact of the
unemployment is seen with the individuals and household curtailing the consumption
drastically to meet financial obligation and factors like this have adverse impact on the
whole economy. It also reduces the output of goods and services which could have
produced by unemployed labor force

CAUSES FOR UNEMPLOYMENT

There are several causes for unemployment and it depends on prevailing conditions of
economy and also on individual’s perception. The following are some of the causes for
unemployment:

Change in technology is one of the serious cause for unemployment. As the technology
changes employers search for people with latest technical caliber. They look for better
substitutes. Job cuts due to change in the technology brings unemployment problem in
the society.

Recession is prime factor for unemployment in most of the countries. Because of the
financial crisis in one country can affect the other countries economy due to
globalization.

Changes in the global Markets are another important factor. Any country economy
adversely affect when its exports are down the line due to changes in global markets,
and increase in price. With this production suffers and companies unable to pay on time
and this increases the rate of unemployment.

IMPACT OF UNEMPLOYMENT
Effect on Economy
Unemployment rate depends on the economy to economy. In developed countries like
United Sates and Europe the unemployment rate considered to be low because many
people are self employed people and working in agriculture. In countries where there
are less self employed and more population with less resources causes unemployment
(Anderson, 2006).

Unemployment affects the economy adversely as the productivity falls below the normal
level. When there is high rate of unemployment in the country, government has to suffer
extra borrowing burden due to decrease in the production and less consumption of
goods and services by the people. Not only the unemployed people consume less its
even employed has weak purchasing power due to fear about their loss of their jobs.
Unemployed not working and not contributing for income generation of the economy,
but also they claim benefits from the government and it is an additional cost for the
economy as a whole (Baker, 2009).

Social Effects
Not only unemployment problem suffers the economy, even there are many social
affects too. The following are some of the social affects of unemployment:

Loss of skills: when there is unemployment in the society, people loose their skills due to
no usage and it causes human capital loss.

Mental illness: There will be loss of self confidence, frustration, negative attitudes
towards common things when there is loss of income, and a person’s self-esteem gets
hurt due to these mental illnesses.

Financial obstacles: Unemployment brings financial obstacles in the family. People

cannot meet their financial obligations on time and it brings frustration among family
members, brings tension at home and may leads to suicides .

Increase crime rate: When there is unemployment in the society crime rate increases.
When people don’t have disposable income they can go to any extent like theft, robbery
and also murders in order to survive their livelihood

CHALLENGES TO GOVERNMENT
Several policies have been made to reduce the unemployment problem in the economy.
Government just needs to focus on execution of these policies and work out hard in
alleviating this problem. Government can expand capital projects like new roads,
constructions of new hospitals and major infrastructural projects which can become a
platform in creation for more jobs in the economy. It increases income generation to the
economy (Fritz, 2006).

Reduction in taxation can bring higher purchasing power to the consumers. It gives
some relaxation to consumers in spending their disposable income. Government should
take proper steps in investment decisions on huge projects like iron and steel, aviation
etc., proper policies are to be made to boost up these projects thereby creating
employment opportunities. 
CONCLUSION
Unemployment is a serious issue for any economy. It creates negative affects to
unemployed as they are jobless and suffer from worse prospects to find new job and
those who are employed feel less secure to keep their jobs in future. However for overall
development of economy, government and individuals has to take initiative steps in
increasing the productivity and improving the standard of living.