Unemployment: Status, Types, Causes and Effects of Unemployment Article shared by   Read this article to learn about the status, type...

Unemployment: Status, Types, Causes and Effects of Unemployment

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Read this article to learn about the status, types, causes and effects of unemployment!

Economic security or financial security is the condition of having stable income or other resources to support a standard of living now and in the foreseeable future. It includes

i. Probable continued solvency

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ii. Predictability of the future cash flow of a person.

iii. Employment security or job security

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Financial security more often refers to individual and family money management and savings. Economic security tends to include the broader effect of a society’s production levels and monetary support for non-working citizens.

1. Status of Unemployment:

Unemployment as defined by the International Labour Organization occurs when people are without jobs and they have actively looked for work within the past four weeks. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force

2. Types of Unemployment:

i. Frictional Unemployment:

Frictional unemployment is a temporary condition. This unemployment occurs when an individual is out of his current job and looking for another job. The time period of shifting between two jobs is known as frictional unemployment. The probability of getting a job is high in a developed economy and this lowers the probability of frictional unemployment. There are employment insurance programs to tide over frictional unemployment

ii. Structural Unemployment:

Structural unemployment occurs due to the structural changes within an economy. This type of unemployment occurs when there is a mismatch of skilled workers in the labour market. Some of the causes of the structural unemployment are geographical immobility (difficulty in moving to a new work location), occupational immobility (difficulty in learning a new skill) and technological change (introduction of new techniques and technologies that need less labour force). Structural unemployment depends on the growth rate of an economy and also on the structure of an industry.

iii. Classical Unemployment:

Classical unemployment is also known as the real wage unemployment or disequilibrium unemployment. This type of unemployment occurs when trade unions and labour organization bargain for higher wages, which leads to fall in the demand for labour.

iv. Cyclical Unemployment:

Cyclic unemployment when there is a recession. When there is a downturn in an economy, the aggregate demand for goods and services decreases and demand for labour decreases. At the time of recession, unskilled and surplus labours become unemployed. Read about causes of economic recession.

v. Seasonal Unemployment:

A type of unemployment that occurs due to the seasonal nature of the job is known as seasonal unemployment. The industries that are affected by seasonal unemployment are hospitality and tourism industries and also the fruit picking and catering industries

3. Causes of Unemployment:

i. Rapid changes in technology

ii. Recessions

iii. Inflation

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iv. Disability

v. Undulating business cycles

vi. Changes in tastes as well as alterations in the climatic conditions. This may in turn lead to decline in demand for certain services as well as products.

vii. Attitude towards employers

viii. Willingness to work

ix. Perception of employees

x. Employee values

xi. Discriminating factors in the place of work (may include discrimination on the basis of age, class, ethnicity, color and race).

xii. Ability to look for employment

Broadly speaking the above factors may be categorized into the following:

4. Effect of Unemployment:

Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction.

i. Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression.

ii. Great Depression

iii. Another cost for the unemployed is that the combination of unemployment, lack of financial resources, and social responsibilities may push unemployed workers to take jobs that do not fit their skills or allow them to use their talents. Unemployment can cause underemployment, and fear of job loss can spur psychological anxiety.