What is 'Unemployment'

What is unemployment?
The term unemployment refers to a state in which an individual actively seeks employment but is unsuccessful. It is said to be one of the critical measures of the economy's strength. The unemployment rate is the most widely used method to determine a country's unemployment rate. This can be found by simply dividing the number of people without jobs by the total population included in a nation's labor force.

National and local governments often endeavor to offer employment opportunities to certain people who meet the eligibility criteria set by them. Usually, work is availed for groups of individuals upon a fixed minimum wage sufficient for bare survival and provides further chances for them to find permanent jobs. These efforts are made to improve the country's economy and reduce the overall unemployment rate.

Discerning unemployment
Unemployment is a major economic criterion because it shows the capability (or incapability) of healthy, educated, and willing individuals to gain a livelihood. People unable to work for various reasons such as retirement, disability, pursuing higher education, etc., are excluded from this. The higher the country's unemployment rate, its economic growth is less productive.

Even without employment, people still maintain a steady consumption of resources. These resources are merely used up without viable beneficial feedback to the country's economy. As a result, there is a proportional decline in the fundamental economic growth. A constantly high unemployment rate is a significant indicator of financial distress in a country and may have social and political ramifications leading to a degeneration of internal structure.

On the other hand, a low unemployment rate signals maximum use of available labor in an economy, higher wage growth, and an overall increase in living standards. An ideal state for the economy of a country is to have maximum output from its potential workforce. However, a meager unemployment rate is an alert toward an overheating economy, causing inflation and unfavorable situations for employers needing extra labor.

Unemployment is broadly divided into two categories by economists—voluntary and involuntary.

Voluntary unemployment refers to an individual's decision to leave previous employment to look for other forms of work out of their own volition with no external circumstances.

Involuntary unemployment is when an individual loses their job due to various reasons, such as being fired. Their employer is unable to maintain employees and now must look for other sustenance.

What can be the causes of unemployment?
There are many different aspects of the socio-economic system that can be blamed for the cause of unemployment. According to Karl Marx, unemployment is a symptom of the capitalist system. He argued that business people required a larger number of unemployed population to make them eager enslaved people and work for a lesser wage.

Causes of unemployment can be divided into different categories- frictional and structural.

Fictional Unemployment- Frictional unemployment can be defined as a scenario when people leave searching for a better job. In the case of frictional unemployment, it is more voluntary than not. It is natural to have 3-4% in a healthy economy.

Structural employment- Structural employment is when the people's skills and income expectations do not match with the jobs available.

There is also a third category of unemployment known as cyclical unemployment. This is when new people enter the workforce.

Types of Unemployment

Frictional Unemployment: It is a natural consequence of market processes and the exchange of information, which can often be expensive. Finding new employment, hiring the individuals matching the requirements issued by the company, and then giving related jobs to suitable people often leads to frictional unemployment.

Cyclical Unemployment: It refers to the periodic rise and fall in the unemployment rate as an economy undergoes growth and losses. During the recession, unemployment rates soar while they dip substantially when an economy is strong and stable.

Structural Unemployment: It comes about due to changes in the technical skill requirements of jobs that frequently accompany the evolution of society. Often, it is easier to hire new, trained workers than to retrain old workers, resulting in loss of employment for the masses.

Institutional Unemployment: These are the socio-economic reasons for unemployment, including—
Government policies like minimum wages, oppressive job licensing laws, etc.
Discrimination in hiring workers on racial, religious, and other bases.
Labor market institutions like high unionization.

What measures can be taken to alleviate unemployment?
Frictional and cyclical unemployment can be remedied by increasing the number of jobs. Steps can be taken to encourage businesses to hire more people at a better pay rate and promote growth.

Structural employment requires more work and a better long-term solution. Changes should be done from the base level to lower the structural employment rate. Unemployment is a very deep-rooted problem. Changes in the same class include skill training and education. More encouragement towards different fields can help create more jobs and allow the backward part of the economy to flourish more.

What are the different reasons for unemployment?
The different reasons for unemployment include-

• Lack of In-demand skills.
• Lack of excess or opportunities This includes Illiteracy, language proficiency, transportation, childcare expenses, and many more
• Lack of skilled jobs. With changing times, the job availability rates are changing as well. The use of AI has resulted in businesses looking for more specific skills.
• Lack of employability. With the need for more jobs, there need to be more employers and businesses.

How is employment a problem?
Unemployment is a problem because it gives birth to poverty, from individual to national level. Poverty leads to many problems. It also drives people towards focusing less on getting educated and living well and more on getting money. The issue will further lead to exploitation and lesser wages. On a country level, this also leads to one country getting under debt on an international level.

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