Question

What are the types, causes and costs of unemployment and their causes? ( I want the answer computer typing NOT handwriting)

Answer 1

UNEMPLOYMENT can be defined as a state of worklessness for a person who is fit and willing to work at the current wage rate.It represents the people in the work force who want to work but do not have a job.It is a condition of involuntary idleness. A n unemployed person is the one who is an active member of the labour force and is seeking work, but is unable to find the same.

TYPES OF UNEMPLOYMENT

1. Frictional Unemployment

Frictional Unemployment occurs when a person has left his current job and is seeking a new one. It is a temporary condition. During the time period of shifting between the two jobs, the person is said to be frictionally unemployed.

2. Structural Unemployment

Structural Unemployment occurs due to the structural changes in the economy that create a mismatch between the skills workers have and the skills needed by the employer. Some of the causes of Structural Unemployment are- Changes in technology (i.e. technological advancements), Geographical immobility (i.e. difficulty in moving workers to a new location) and Occupational immobility (i.e. difficulty in learning new skills).

3. Natural Unemployment

The sum total of Frictional Unemployment and Structural Unemployment is referred to as Natural Unemployment. It is the lowest rate of unemployment an economy can reach. There will always be some level of unemployment even in a healthy economy as it is caused by factors other than a bad economy.

4. Cyclical Unemployment

Cyclical or Demand-Deficient Unemployment is caused by contraction phase of the business cycle. That is when there is downturn in the economy, the aggregate demand for goods and services fall dramatically forcing businesses to fire the surplus labours to cut costs. It mostly occurs during recession or depression.

5. Classical Unemployment

Classical Unemployment is also known as "Real Wage Unemployment". It occurs when wages are higher than what the laws of supply and demand would normally indicate. Its when the trade unions and labour organisations bargain for higher wages or Government sets a "minimum wage" thats too high,this in turn leads to a decrease in the demand for labour.

6. Seasonal Unemployment

Seasonal Unemployment occurs due to the seasonal nature of the job. This type of unemployment is most common in industries like- Agriculture, Tourism, Catering,etc.

7. Underemployment

Underemployed workers are those who have jobs but they aren't working to their full capacity in accordance with their qualifications and abilities. This includes those who are working part time but would prefer full time jobs and those are not being fully utilised in respect of their skills and capabilities.

8. Disguised Unemployment

Disguised Unemployment is not visible, it occurs when a person doesn't contribute anything to the output even when visibly working and thus their marginal productivity is ZERO. For e.g. It happens amongst Family Labour in Agriculture where many people are engaged unnecessorily on a single piece of land.

CAUSES OF UNEMPLOYMENT

1. Slow Economic Growth

Although economy is developing, but the rate of growth is inadequate to absorb the entire labour force. The opportunitis of employment are not sufficient to absorb the additions in the labour force of the economy.

2. High Population Growth

The galloping increase in population has led to the growth in labour supply without the corresponding increase in employment oppurtunities which has further aggravated the unemployment problem.

3. Technological Changes

A shift from labour-intensive techniques to capital-intensive techniques has resulted in unemployment. Advancements in technology leads to a need of providing training to the labourers to make them fit for working with new machines or the latest technology.

4. Lack of Infrastructure Development

Lack of investment and infrastructure development limits the growth and productive capacity of different sectors which leads to inadequate generation of employment opportunities.

5. Migration

Unemployment is also caused by migration of people from one place to another. This cretes a burden on the place where the people shift in respect of jobs available. As the locals will face problems due to insufficient employment opportunities.

COSTS OF UNEMPLOYMENT

1. Loss of Income

Loss of income can further put the individuals under debts and increased rates of relative poverty.

2. Lower GDP Of The Economy

Higher employment will lead to lower incomes and output.

3. Political Instability

Mass unemployment leads to social unrest which in turn exagggerates the problems of poverty and inequality in the economy.

4. Increased Government Borrowing

Higher unemployment will cause a fall in tax revenue and the government will also have to spend more on unemployment and related benefits, which will lead to a financial burden on the government. As a result the government borrowings from other organisations may increase posing a threat to the financial system.

5. Erosion of Skills or Loss of Human Capital

Prolonged Unemployment will lead to loss of skills of skills, basically robbing the economy og otherwise useful talents. It also harms the future prospects of the individuals who will find it all the more difficult to find job after being unemployed for so long.