Unemployment is defined as an economic indicator that implies the proportion or the number of people in any economy who are able and willing to work, but are not able to secure jobs (Flaim, 1990). An individual in such situations is said to be simply unemployed. However, individuals who have no willingness to work but are able to work are basically referred to as being economically inactive. Higher rates of unemployment are typical of an economy which is struggling (Eguía and Echevarría, 2004). In particular, it is common in an economy where the supply of labour outstrip the demand of the employers. There are manifold causes of unemployment. Different types of unemployment are distinguished by economists. These are mainly cyclical unemployment, structural employment, frictional unemployment and seasonal unemployment (Eguía and Echevarría, 2004). Based on all these types of unemployment, changes in population do play an important role in the rate of unemployment in a given economy.
In any economy, a rapid growth in population results in unemployment. For instance, in the rural area of India, there is a sharp increase in population. This has negatively affected the situation of unemployment basically in two different ways (Otero, et. al., 1992). First, the sharp rise in population directly encourages employment in the area by simply contribution a larger addition to the labour force. The available jobs thus do not meet the demand from the larger labour force. It is fact that increasing labour force simply requires creation of fresh job opportunities. However, due to the larger population, the expansion of available employment opportunities does not sufficiently match the alarming growth of an economy’s labour force. This results in a situation of unemployment (Eguía and Echevarría, 2004).
Equally, an increase in an economy’s population leads to unemployment by simply resulting in a reduction of the country’s resources for the formation of capital (Otero, et. al., 1992). In particular, a rise in population over an economy’s absolute base simply results in an absolute number. In fact, this situation implies that additional expenditure is used basically for their education, maintenance, and rearing up.
Consequently, excess resources are fully employed in private consumption like food, shelter, and clothing in the public consumption such as electricity, drinking water and educational facilities (Flaim, 1990). In the long run, this situation reduces the opportunities for diverting an economy’s income to investment and saving. Investment is bottom-line for the creation of employment opportunities. Therefore, population growth specifically creates a major obstacle growth to creation of employment opportunities which eventually results in unemployment. The extent to which a nation's labor supply is not matched by job opportunities is simply referred to as unemployment.
The changes in population variables like age and sex as well creates unemployment. For instance, an economy with larger number of people of youthful age implies that younger individual’s inflow into the labour force and typically strains the resources, polity and economy which were of course designed for a smaller population. Typically, this results in alienation and unemployment, unless more job opportunities are created to match the excess supply of youthful labour (Flaim, 1990).
Similarly, population changes with respect to age also lead to unemployment. The ageing population for instance, completely gets neglected while they are looking for employment opportunities. Although they are more than willing to work, the labour market does not welcome them wholeheartedly (Garnet and Lewis, 2007). This renders them unemployed and hence frictional unemployment. Frictional unemployment is that situation where there is immobility in the labour force. The ageing population may either be ignorant about employment opportunities in other regions or simply decline to work certain regions as well. Also, ageing population constantly change jobs and in the process, they are rendered jobless.
An imbalance of age and sex in a given population also may result in unemployment. In particular, a sharp shift in imbalance between labour supply and the demand for it definitely give rise higher unemployment. In fact, it results in a vicious cycle (Garnet and Lewis, 2007). Economies with higher population are generally characterized by higher dependency burden, either from the young age structures or from the ageing population. This basically leads to lower rates of investments and savings. With lower investments and savings, lower economic growth is inevitable hence a blockage to the creation of employment opportunities. This eventually results in a situation of unemployment.
Population changes are as well perceived to be greatly associated with structural unemployment. In essence, structural unemployment refers to an unemployment situation where variations in the labour market or the economy do not match the skills of the workforce even if the jobs are available (Small and Song, 1994). Rapid growth in population basically implies that education systems are constrained and thus many people do not get the adequate training to enter the job market. Therefore, certain categories of labour are not adequately supplied.
Generally, it is justified that there is the existence long run relationships between the population variables and an economy’s rates of unemployment. The major relationship is however that of population size and age structure. Also, the rates of unemployment are dependent on population structure.
Reference
Eguía, B. and Echevarría, C. A. (2004). Unemployment Rates And Population Changes In Spain. Journal of Applied Economics. Vol. 7 Issue 1, p47.
Flaim, P. (1990). Population Changes, the Baby Boom, and the Unemployment Rate. Monthly Labor Review, v113 n8 p3-10.
Garnet, A. M. and Lewis, P. (2007). Population and Employment Changes in Regional Australia. Economic Papers. 26(1), 29-43.
Otero, J. M., Martin, G. and Trujillo, F. and Fernandez, A. (1992). Population, labour force and unemployment in Andalusia: prospects for 1993. International Journal of Forecasting, 7(4): 483-92.
Phelps, E. (1994). Structural Slumps : The modern equilibrium theory of unemployment, interest, and assets. Harvard University Press.
Small, K. A. and Song, S. (1994). Population and Employment Densities: Structure and Change. Journal of Urban Economics, 36(3), 292-313. Academic Press.
