Unemployment refers to an economic indicator of the extent and condition of joblessness in an economy. Its measurement is based on the unemployment rate, which is calculated by diving the number of unemployed people by the total labor force. Therefore, unemployment is a state of not having a job. It is a key indicator of the economic state of a country. It is the greatest cause of poverty in the country because unemployed people cannot afford basic needs like food and shelter. Although developing countries are most affected, such economically advanced countries like the US are also suffering from high unemployment rates. For instance, the current unemployment rate in the US is 8.2% (Hobson). This paper seeks to discuss the causes and effects of unemployment and suggest appropriate solutions to the problem.
There are various theories and predictions put forth by economists to explain unemployment. One such theory is the Keynesian theory, which explains that unemployment is caused by “an increase in demand rates while the economy operates below its growth rate and potential output” (Keynes, 2006, 34). Based on this theory, unemployment is caused by various issues as described below.
According to Knoop (2010), economic inflation is a major cause of unemployment. The economy of a country experiences rapid growth of prices compared to other economies. Therefore, companies are unable to export their products because they cannot compete with the prices of products from other markets. The income declines and companies gradually lay off workers because they cannot pay them, thus, increasing the rate of unemployment.
Economic recession, which is characterized by the financial crisis, leads to laying-off workers because the organizations are unable to operate. The US was majorly hit by recession in 2007 and most people lost their jobs. It also turned out to be a global problem as most countries were hit by the financial crisis. People are forced to remain unemployed until the economy stabilizes (Knoop, 2010).
Another cause of unemployment is welfare payment. Although this is a security measure, it can result to unemployment. Symes (1995) asserts that the financial support given to people by the government reduces their motivation and willingness to work. People become over-depended on the aids. As long as the incentives can sustain them, they don’t bother looking for jobs. This makes them remain deliberately unemployed.
The technological change has also resulted in job loss. Most of the jobs that used to be performed by human labor can now be performed by machines. Companies are able to save large sums of money because one machine can perform multiple jobs that would otherwise require more people (Symes, 1995). Additionally, people that are skillful enough to operate new technologies have higher chances to get employed than those who lack essential skills. Thus, senior employees are more likely to lose jobs than young persons who have the opportunity to learn about the new technology.
Job dissatisfaction can lead to unemployment. Most people want to work in an environment where they feel appreciated and are certain of job security. A number of people work on temporary contracts because of financial crisis or family pressure. However, an employee who is not happy with his job is likely to quit because he does not get enough money for the kind of job he does not like. Therefore, job dissatisfaction would lead to unemployment is cases where one wants to work in an environment that is worth his skills, payment and value.
Discrimination and corruption could deprive a person a job opportunity. For instance, racial discrimination is still a problem in many organizations. Foreigners remain unemployed in most countries because priority is given to the locals. Discrimination is also based on religion, race and ethnicity. Under such circumstances, it becomes extremely difficult to find a good job. Earning money for sustenance becomes difficult and some foreigners are forced to move out of the country to try their luck elsewhere. Similarly, cases of corruptions are high, especially in the third world countries, where one has to bribe a senior manager to get a job. Discrimination against people with disabilities can also result in unemployment. Most organizations do not employ people with various forms of disabilities (Symes, 1995). For instance, it is difficult for a blind person to work in a company that does not have mechanisms to allow him/her to work.
The effects of unemployment are diverse. For starters, it leads to loss of human resources. One of the reasons why people attend training is to acquire skills to get a specific job. If they do not get a job, it means that all the efforts to improve their skills are wasted. Similarly, there are thousands of well-trained individuals that have the capacity to contribute to national development. However, if they do not put their skills into action, they are as good as nothing. Therefore, unemployment wastes man’s power that could have been harnessed for economic development.
Unemployment also leads to a poverty rate increase. It deprives people of income sources. It becomes very difficult to access basic needs such as healthcare, food, and shelter. Since there is no option, people are forced to live with the little they have. The kinds of lives poor people live are so devastating that their health is compromised (Symes, 1995).
Unemployment causes many social problems. Unemployed people are so desperate to survive that they can do anything to meet their needs. For instance, some might end up stealing or accepting bribes to get some money. Similarly, some people can take advantage of the poor by exploiting them. For example, because of the desperation, a poor man would be willing to bribe a manager to get a job. Some people, especially the youth, can engage in unhealthy behavior like use of drugs and alcohol because of their idleness. Unemployment, therefore, jeopardizes social security.
Exploitation of laborers by greedy employers is also common. Employees are forced to work for a long period of time, yet paid peanuts. The employers know that there are so many people looking for jobs and, therefore, they would not hesitate to fire any employee who complains of poor working conditions. Employees also work under adverse conditions, but they cannot complain because they fear losing their jobs (Hobson).
Political stability is dependent on the country’s economy. Therefore, unemployment can result in political instability. Poor people are desperate for survival and can easily be enticed by various antisocial elements like corruption and hooliganism. For example, a politician can take advantage of the poor voters to buy their votes by bribing them. Additionally, parliamentary candidates give numerous false promises in order to cheat the poor voters and make them vote in their favor. On the other hand, poor people can easily lose faith in peaceful means and democratic values. They would, therefore, consider the government and the election process as worthless and would not exercise their democratic right. They can also engage in violence to protest elections or disrupt the election process.
The best way to solve unemployment is to be innovative and self-employed. Most people go to school because they want to graduate and get employment in a successful organization. Although this is a good idea, not everyone can be employed by these organizations. It would be much better for people to come up with innovative ideas and start their own business. However, for this to happen, retraining programs have been linked to specific regions. Instead of focusing on nationwide jobs, the local government and the business fraternity should tailor retraining programs to get the best people to fill in the vacant positions in their jobs. In addition, the federal and local governments should offer incentives to people and allow them to create new jobs. For instance, getting capital to start a business venture has always been a huge problem. The government should fund innovative ideas by giving loans or grants to finance the new projects.
Establishing a national wage-insurance system would also help solve unemployment. Other than the unemployment-insurance scheme, there is a need to develop a wage-insurance scheme that will help workers with lower salaries. Lawrence Katz, a Harvard University economics professor, has been fighting hard for this idea to assist employees facing loss of income. This program would ensure that people pay in some amount like in the Medicare system and weekly checks would be issued to help them cope with the economic conditions (Freeman & Katz, 1995).
There is a need for cooperation between the federal government and the local business community. The government can never employ all of the graduates. Local entrepreneurs are better placed to create new business opportunities to employ the community members. The federal government can, therefore, give incentives to the local entrepreneurs to enable them expand and create various business opportunities.
In conclusion, it is evident that unemployment leads to poverty. Therefore, the government should cooperate with the private sector to solve this problem. Additionally, people should be encouraged to be innovative and self-employed rather than depending on the government to create jobs. Nonetheless, the unemployment rate is a key determinant in the country’s sustainable development and the government should be fully committed to solving it.