Unemployment occurs when the factors of production that are capable of producing goods and services are not utilized or they remain idle. It is mostly related to labour. Unemployment of labour means, people of working age is unable to get a job though they are willing to work. This is because the availability of jobs is limited. Unemployed people are not able to earn wages or salaries .This causes economic problems for the country. As they don’t have income they have lower living standards. (AmosWEB).Unemployment is a macroeconomic issue which causes scarcity of goods and personal hardships. The government takes different measures to curb unemployment as it leads to high social and economic costs. The important types of unemployment are cyclical, structural, seasonal and frictional unemployment.
Types of unemployment
Cyclical unemployment occurs due to a fall in the demand of some of the products. Mostly during recession the demand for durable goods decline .For example the demand for cars and houses decline during recession and people in this sector lose their jobs. This unemployment is temporary because, when the demand for the products increases they will be employed again. Structural unemployment occurs when the demands of the economy does not match with the available labour skills. The production activity may require specific skills and training which may not be available. The available resources get structurally unemployed as their skills are incompatible. Some workers face unemployment in different seasons. This is called seasonal unemployment. This is mostly regular and can be predicted. Construction and harvesting activities are seasonal and people involved in farming and building construction remain unemployed after the season. Frictional unemployment occurs due to temporary transitions by workers and employers. This type of unemployment is mostly present in the economy. This is a voluntary unemployment as the job seekers wait for the most suitable work. This is mostly with the youngsters as they take time to settle in jobs that keeps them satisfied. Due to lack of information regarding available skilled labour, companies are unable to hire. Sometimes the job and the skill required cannot be matched due to the distance. Hence though there is availability of jobs unemployment prevails due difficulty in matching the production activity and labour at the right time and location.
In contrast to unemployment full employment is a situation wherein all the capable people willing to work are employed at the existing wages. It also means a situation with no involuntary unemployment. Such situations cannot happen because of frictional and seasonal unemployment. The natural rate of unemployment will include both frictional unemployment and structural unemployment. It is determined by some of the factors like skills, job information, and labour mobility.
Effects of unemployment.
A high rate of unemployment has adverse effects on the economy of the country. It affects the individuals as well as their family .Long time without work will make people lose their skills and make them less confident. Since the country is unable to utilize the productive resources there is scarcity of goods. The revenue of the government reduces and the growth in GDP is slow. The finances of the government will be affected and the government will have to incur higher welfare costs.
The problem of unemployment has to be solved by increasing the job availability. Government should take adequate steps to provide additional jobs and also encourage entrepreneurship. Reduced interest rates can help people to start their own business thus generating employment. Students, business people and educators should find the solution for unemployment by focusing on the requirement in the country and produce suitable and skilled labour. Economic growth of a country is possible only if the factors of production are fully utilized. Therefore unemployment rate should be reduced by the government for the growth of the country.
Reference
UNEMPLOYMENT AmosWEB Encyclonomic WEB*pedia, Retrieved from http://www.AmosWEB.com.AmosWEBLLC, 2000-2016.
