The Cause and Effect of Unemployment

The Cause and Effect of Unemployment

May 5, 2013

The Cause and Effect of Unemployment

When one think of unemployment, we automatically think of it as someone who is not working. We do not dig deeper into the situation and examine the causes, types, or downside to this major situation. Unemployment is the term used to define a person seeking employment while lacking a current job (Amadeo, 2012). In economics, unemployment is used to describe the condition and severity of joblessness within an economy (Griswald, 2011). Unemployment is a problem that occurs all across the globe in the different economies and governments.

Unemployment is a major economics problem which plagues individuals as well as society. Unemployment itself is caused by many different reasons like recession, inflation and changing technology (Sengupta, 2011). Unemployment can also derive from employee-related situations like job dissatisfaction, personal values and discrimination. Unemployment can have very detrimental effects on an economy. These effects may be financial costs, decreased spending power, and recession (Simpson, 2011). Unemployment affects the economy in three main areas. These areas are individual, society, and government.

Before one can determine the causes and effects of unemployment, we must first examine the different types of unemployment. Unemployment can be divided into five different categories. Economist use frictional unemployment, structural unemployment, cyclical unemployment, seasonal unemployment, and real wage or classical unemployment to categorize the unemployment epidemic (Yang, 2012).

Frictional unemployment is unemployment that will always be present in every economy no matter how prosperous it may be. Frictional unemployment describes someone that is no longer employed but searching for employment (Frictional Unemployment n.d.). Frictional unemployment can be minimized with the development of efficient labor markets. Efficiency of labor is the ability of labor to increase output without increasing the quantity of labor (Griswald, 2011). The more developed an economy is, the higher the chances are of obtaining a job faster which in turn the probability of frictional unemployment becomes lower.

Structural unemployment is deemed to be a relatively long-lasting form of unemployment. This results from long-term shifts and changes in the economy instead of the short-term savings in economic conditions. An economy usually encounters structural unemployment when the skills of a person are not sufficient to meet his job responsibilities. Structural unemployment develops around the major changes in one’s economy. This can be from a company moving from an industrial to a technological economy. Workers who are out of work due to this change may not be trained in fields suitable for the new economy. Due