Unemployment is a term referring to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job. Usually measured by the unemployment rate, which is dividing the number of unemployed people by the total number of people in the workforce, unemployment serves as one of the indicators of a country’s economic status.
Causes of Unemployment
The government defines those who want to work as people who have actively looked for work within the past four weeks and determines the number of people currently unemployed through a monthly survey called the Current Population Survey.
People can be unemployed for many reasons:
They quit their position and are looking for a new one.
They were laid off due to lack of work and haven't yet been rehired.
Their company reduced the work force, and they are seeking a new position. This can be due to a local condition, when the company closes a plant or division, or a national condition, when the economy slows and many companies reduce their work force.
They have recently returned to the work force - perhaps from pregnancy or attending school - and haven't yet located a position.
The need for their skill set has gone down, and there are limited positions available, which may lead to unemployment until they train for a new position.
Technology has reduced the need for their type of position.
Now, let's try a quick quiz. Pretend you receive a call from the Current Population Survey. You are currently in school and not working, although you have started applying for positions that you would start after graduation. Would they classify you as unemployed? And the answer is…no, you would not be considered unemployed, because you are not currently available for full-time work.
The causes of structural unemployment: Four factors that keep people from the jobs they deserved
There is a specspecter huniting advanced industrial countries: structural unemployment. Recent years have seen growing concern over declining jobs, and though corporate profits have picked up after the Great Recession of 2008, jobs have not. It is possible that “jobless recoveries” could become a permanent feature of Western economies. This illuminating book focuses on the employment futures of advanced industrial countries, providing readers with the sociological imagination to appreciate the bigger picture of where workers fit in the new international division of labor. The authors piece together a puzzle that reveals deep structural forces underlying unemployment: skills mismatches caused by a shift from manufacturing to service jobs; increased offshoring in search of lower wages; the rise of advanced communication and automated technologies; and the growing financialization of the global economy that aggravates all of these factors. Weaving together varied literatures and data, the authors also consider what actions and policy initiatives societies might take to alleviate these threats. Addressing a problem that should be front and center for political economists and policymakers, this book will be illuminating reading for students of the sociology of work, labor studies, inequality, and economic sociology.
Factors affecting level of unemployment in South
Purpose
This study aims to investigate the short-run and long-run relationship between economic variables and the unemployment rate in South Asian countries.
Design/methodology/approach
A panel Vector Error Correction (VECM) model is used to establish the long-run and the short-run relationship between unemployment rate and selected economic variables. Data were collected from WDI, WGI and FDSD for the year's 1994–2016.
Findings
The finding of the study showed a negative and significant relationship at the 5% level of significance among governance, internet users, mobile cellular subscriptions, fixed broadband subscriptions and human capital with an unemployment rate of South Asian economies. On the other hand, financial activity (credit) and population growth have a positive and significant relationship with the unemployment rate.
Research limitations/implications
In the light of our findings clear that employment problems can only be created if the government does not put in place adequate measures to control the population and allocate resources equitably, giving a sense of belonging to all citizens. Therefore, to provide the controlled population with the necessary employment opportunities, it is necessary to allocate resources efficiently and to launch projects aimed at creating jobs.
Practical implications
Transparency or merit is the basis of good governance and the very first step to achieving the goal of good governance is to fight against corruption. It provides a complete justification for providing good quality management records, financial controlling and managerial systems.
Originality/value
The connections between governance and unemployment are complex and need to be studied in a detailed manner. There is the absence of literature that strongly interfaces good governance to unemployment; the fundamental work in this regard is Farid (2015). They locate a solid relationship between good governance and improving external debt situation by in Pakistan a time series analysis. But there is no research in the context of South Asian countries between governance and unemployment.
Effects of High Unemployment Rates
Long-term unemployment can have serious ramifications for the individual and for the economy. People who are out of work for a long time lose their job skills and become less employable as time goes by. They also lose the motivation to look for work and become dissatisfied and depressed. Long-term unemployment can also be a burden upon taxpayers and social service systems. Below are a few of the negative consequences of a high unemployment rate:
Higher Foreclosure Rates: When people cannot pay their mortgage because they have lost their jobs, they risk losing their homes.
Put off Starting a Family: Couples are hesitant to marry, particularly in low-income communities, because they feel that it is unacceptable to marry without a steady job.
Increased Crime: During long periods of high unemployment, some communities deteriorate and crime rates increase.
Effects of Low Unemployment Rates
Low unemployment rate is good for the individual and the wider community in general. Those who work often feel better about themselves and can afford to spend more. With low unemployment rates, those who work can demand higher wages and feel more secure in their jobs. The economy benefits from increased activity and government agencies receive more tax dollars, which can then be spent on social programs. Below are some of the positive consequences of a low unemployment rate:
Strong Economy: When unemployment is low, it means that the economy is in good shape because there is demand for labor.
Lower Welfare Spending: During low unemployment the overall economy benefits from increased tax receipts and lower spending on welfare. More people working means fewer people claiming welfare.
Social Effects: Those who work generally feel better about themselves. The crime rate drops along with divorce and suicide rates.
Effects
High and the persistent unemployment, in which economic inequality increases, has a negative effect on subsequent long-run economic growth. Unemployment can harm growth because it is a waste of resources; generates redistributive pressures and subsequent distortions; drives people to poverty; constrains liquidity limiting labor mobility; and erodes self-esteem promoting social dislocation, unrest, and conflict.
The 2013 winner of the Nobel Prize in Economics, Robert J. Shiller, said that rising inequality in the United States and elsewhere is the most important problem.
What's the Unemployment Rate?
The unemployment rate definition is the proportion of unemployed workers in a labor force. What does the unemployment rate mean? It means there is a certain percentage of unemployed people in the labor force. The primary purpose of tracking the unemployment rate is to determine the health of an economy, which helps set monetary policies. In every economy, the unemployment rate is constituted by various factors such as demographics, technology trends or automation, education and training, government hiring trends, and gender-related job preferences. These factors can determine the decrease or the increase of the unemployment rate. It is calculated by dividing the number of unemployed workers by the available labor force, and the obtained figure is multiplied by 100. The formula is written below:
What is structural unemployment and why does it occur?
Structural unemployment occurs as a result of structural economic changes. technological changes and industrial decline result in a mismatch between peoples' skills and requirements in emerging industries.
What is the difference between structural and frictional unemployment?
Frictional unemployment emerges when people shift from one job to another. On the other hand, structural unemployment is caused by structural changes in the economy, such as technological advances.
What are some examples of structural unemployment?
Structural unemployment results from structural changes in the economy. One example is when robotic arms programmed to conduct surgeries render surgeons structurally unemployed. Another example is self-driving cars that make driving skills obsolete.
What Causes Structural Unemployment?
As already clarified, structural employment is caused by fundamental changes in the economy's structure. But what are the specific causes of structural employment? Below are the reasons why this type of unemployment occurs
Corruption significantly impacts unemployment in South Africa through several interconnected mechanisms:
Resource Misallocation: Corruption often leads to the misallocation of resources. Funds intended for job creation, infrastructure development, and public services can be diverted for personal gain. This undermines economic growth and limits job opportunities.
Business Environment: High levels of corruption create an unstable business environment. Companies may be deterred from investing or expanding due to concerns about bribery, regulatory capture, and unfair competition. This reduces job creation in both the formal and informal sectors.
Public Sector Inefficiency: Corruption in public institutions can lead to inefficiencies and poor service delivery. If government agencies are corrupt, they may not effectively implement policies aimed at reducing unemployment, such as skills development programs or labor market interventions.
Inequality and Social Unrest: Corruption exacerbates inequality, leading to social unrest and instability. High unemployment rates, particularly among youth and marginalized communities, can result in protests and strikes, further deterring investment and economic growth.
Foreign Direct Investment (FDI): Corruption can deter foreign investors, who might fear that their investments will not be protected or that they will face extra costs due to corrupt practices. Reduced FDI can lead to fewer jobs being created.
Policy and Governance: Corruption can skew policy priorities, focusing on short-term gains for a few rather than long-term strategies to boost employment. Good governance practices are essential for creating a conducive environment for job creation.
In summary, corruption in South Africa has a multifaceted negative impact on unemployment by hindering economic growth, discouraging investment, and perpetuating inefficiencies in both the public and private sectors. Addressing corruption is crucial for improving the employment landscape in the country
The Employment Report put out monthly by the U.S. Bureau of Labor Statistics (BLS) is one of the most-watched indicators of the state of the United States economy, headed by one statistic: the unemployment rate. Not only does the rate of employment – or unemployment – provide a snapshot of the American economy’s strength, but it also delivers a measure of overall satisfaction – or dissatisfaction – with the state of America, its government and its leaders.
Most recently, the unemployment rate fluctuated wildly, from a low of 4.7 percent in 2008 to a peak of 10.1 percent in 2009, after the U.S. housing bubble burst and Wall Street saw collapses unlike those seen since the Great Depression in the 1920s and 1930s.
The consequences of widespread and lingering unemployment are dire – not just for the nation’s overall economy, which loses a significant portion of consumer spending, one of its key drivers of growth, but also for the unemployed individuals, themselves. Long-term unemployment can often be financially, emotionally and psychologically destructive.
A job helps define a person’s place in society, and productive work has long been understood as one of the key elements necessary for a happy life. Persistent unemployment can lead to illness, marital strife, depression and even suicide.
Also, being able to pay one’s bills, provide for one’s family and contribute to society are essential factors in maintaining cultural well-being and communal identity. In addition to the steep decline in home values, America’s recent spate of foreclosures, with its concomitant erosion of robust neighborhoods, has been a direct result of widespread unemployment.
Given the importance of unemployment in U.S. society – not to mention the politically charged arguments for how to keep it low – it is instructive to understand how unemployment is measured, the different causes of unemployment, how the federal government tries to control unemployment and how unemployment rates fluctuated in the recent past.
How Unemployment is Measured
The U.S. government’s monthly Employment Report is based on two surveys. One is the Establishment Report, which asks a random sample of employers how many people are on their payroll. The second is the Current Population Survey (CPS), in which approximately 60,000 households are asked whether their members are working or looking for work.
The responses help the BLS produce an estimate of the number of employed Americans vs. the number of unemployed people. Being unemployed is defined as those who do not have a job, have actively looked for work in the prior four weeks and are available to work. Also listed as unemployed are laid-off workers waiting to be called back to the same job.
The BLS does not include all categories of the unemployed in its official unemployment rate.
In fact, it calculates six separate measures of unemployment, classified as U1 through U6:
U-1 – Unemployed 15 weeks or longer.
U-2 – Have completed temporary work or recently lost their jobs.
U-3 – Official unemployment rate, the total unemployed as a percentage of the civilian labor force.
U-4 – The total of unemployed (U-3), plus the total of discouraged workers – those who have given up looking for work because they don’t think there are jobs available.
U-5 – The total of unemployed (U-3), plus discouraged workers (U-4), plus all those “marginally attached” to the labor force – those unemployed who would like to work, but have not looked for work recently.
U-6 – The total of unemployed (U-3), plus discouraged workers (U-4), plus marginally attached workers (U-5), plus part-time or underemployed workers who want to work full-time but can’t because of economic reasons.
The Causes of Unemployment
Economists, academics and policy makers long have argued about the causes of and remedies for unemployment. While it is unlikely a consensus ever will be reached, given the conflicting political and sociological ideologies in American society, most agree that there are three main categories of unemployment that are readily recognizable. Those are frictional unemployment, structural unemployment and cyclical unemployment.
Frictional Unemployment
Frictional unemployment is always present in the economy. It comes from temporary transitions that workers make when moving from job to job looking for better pay or a job that more precisely matches their skills, or because of a change in locale or family situation. It is also a reflection of new or returning workers into the labor force (e.g., graduating college students or empty nesters rejoining the marketplace).
Frictional unemployment may also be the result of employers refraining from hiring or laying off workers for reasons unrelated to the economy.
Structural Unemployment
Structural unemployment is created when there is a mismatch in the demographic or industrial composition of a local economy. For example, structural unemployment can be high in a place where there are technically advanced jobs available but the workers in that area lack the skills to perform them, or conversely, in a locale where there are workers available but no jobs for them to fill.
Advances in new technologies can cause a decline in older industries, which then must shed workers to stay competitive. One example is the U.S. newspaper industry. Many newspaper reporters, editors and production workers have lost their jobs over the past decade as web-based advertising eclipsed newspapers’ traditional sources of revenue and circulation waned as more consumers got their news from television and the Internet. Laid-off journalists, printers, deliverers, etc., all increased the structural unemployment numbers.
Another example is small family farmers, whose farms cannot match the economic power of wealthy agri-businesses. Scores of farmers left the land and entered the workforce. When they fail to find jobs, they add to the structural unemployment statistics, as do factory workers whose employers have moved operations to low-wage countries.
Cyclical Unemployment
Cyclical unemployment occurs when there is not enough demand for goods and services in the economy at large to provide jobs for everyone who wants one. According to Keynesian economics, it is a natural result of the boom and bust business cycles implicit in the nature of capitalism. When businesses contract during a recessionary cycle, workers are let go and unemployment rises.
When unemployed consumers have less money to spend on goods and services, businesses must contract even further, causing more layoffs and more unemployment. The cycle continues to spiral downward unless and until the situation is improved by outside forces, particularly government intervention of some kind.
How the Government Tries to Lower Unemployment
Whenever unemployment gets too high – usually above 6 percent – the federal government often tries to step in and create jobs. This is especially important if a high rate of unemployment is cyclical, exists across a broad range of industries and segments of the economy and is stubbornly long term (all of which are characteristics of the unemployment brought about by the Great Recession).
The two major tactics the government can employ in its job-creating strategy are changes to its monetary policy and/or changes to its fiscal policies. Different remedies have been applied at different times in our history with different results – and politics always plays a role in whether or when a particular tactic is going to be introduced.
Monetary Policy
Monetary policy is controlled by the Federal Reserve Bank of the United States, the independent central bank empowered to control the country’s money supply. To stimulate the economy into creating more jobs, the Fed often offers help in one of two ways.
One tool is lowering the interest rates in the overall economy so that it is cheaper for banks and businesses to borrow money. The goal is to encourage banks to invest and businesses to expand, stimulating economic vitality and thus bringing about increased hiring. Lower interest rates also decrease individual borrowing costs, inducing consumers to spend more money.
The second Fed tool is increasing the amount and/or the availability of money in circulation by buying and selling various financial instruments (treasury bills, bonds, etc.). As more money enters the economy, commerce expands and businesses can hire more workers.
Fiscal Policy
If the Fed’s expansionary monetary policy is not adequate to reverse the economy’s downward trend, then the federal government will employ various fiscal policies in order to combat continuing high levels of unemployment.
Some things the government can do:
Cut taxes for businesses and individuals to increase spending and stimulate economic growth.
Increase government spending in targeted industries in order to spur employment.
Hire workers to build things like mass transit systems or provide services like infrastructure upkeep and repair.
Provide benefits to unemployed workers so they can spend on basics like food, clothing and housing, driving retailers and manufacturers to hire more people.
History of Unemployment
The U.S. government began tracking unemployment officially in the 1950s, but estimates of previous unemployment rates are not difficult to ascertain. The Great Depression of the early 1930s had an unemployment rate of 23.6 percent – the highest in modern times. The country’s lowest rate – 1.2 percent – came in 1944 when millions of men were in uniform and the wartime (World War II) economy was in overdrive. The lowest post-war rate was 2.9 percent in 1953.
Since 1948, the end of the postwar period, the United States has experienced 11 recessions. Over that span, the federal government has employed various methods to push back unemployment caused by these cyclical contractions of the economy.
For example:
The Federal Aid Highway Act, which authorized the construction of the Interstate Highway System, putting thousands to work, helped President Dwight Eisenhower combat the recession of 1957 and its unemployment rate of 6.8 percent.
President John F. Kennedy cut taxes and expanded Social Security and unemployment benefits to counter a brief recession at the beginning of his term. The rate went from 6.7 percent in 1961 to 5.5 percent in 1962.
The unemployment rate reached a peak of 10.8 percent in the early 1980s, falling to 5.3 percent by the end of President Ronald Reagan’s second term. It rose to 7.5 percent in 1992, under George H.W. Bush, and hovered between 4 and 6 percent during the Bill Clinton and George W. Bush presidencies. The Great Recession pushed it above 10 percent for the second time in decades. It stayed above 8 percent until September 2012.