Unemployment: Causes, Implications and Solutions - Essay Sample

Introduction

Unemployment is a great concern for many economies in the world. Though employment levels seem to be rising globally, the unemployment menace is still a pressing issue. The unemployment problem is exacerbated by unstable economic cycles and a growing influx of skilled and unskilled personnel into the labor market. The causes of unemployment are diverse, as well as its effects. The paper aims to discuss the causes of unemployment and their long-term implications on an individual, societal, and economic level.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Causes of Unemployment

According to the Bureau of Labor Statistics, unemployed people include the ones who are jobless and actively searching for jobs and those that have been temporarily laid off from their current work (Amadeo). There are several types and causes of unemployment. These types include frictional, structural, and cyclical unemployment. Frictional unemployment occurs when employees leave their current jobs in search of a better one. Structural unemployment occurs when there exists a mismatch between the skills and income requirements of workers with the jobs available in the labor market. Lastly, cyclical unemployment occurs during recession or periods of low economic growth. The structural and frictional types of unemployment occur in a healthy economy where the natural rate of unemployment ranges between 3.5 and 4.5 % according to data from the Federal Reserve (Amadeo). In all the types of unemployment, there are underlying causes that contribute to workers' inability to secure stable job positions in the market. These causes need to be addressed if the problem of unemployment is to be tackled effectively.

Frictional Unemployment

The main cause of frictional unemployment is when workers voluntarily leave the workforce. Some employees quit unfulfilling jobs in search of better opportunities, and in the transition period, they remain unemployed. In other instances, when workers relocate to new towns, they may find it difficult to secure job positions, and thus they remain unemployed in the meantime. Frictional unemployment also occurs with the entry of new workers into the workforce. This mainly happens when graduates enter the workforce and are actively involved in searching for positions that fit their new skills and qualifications. This is the contributing factor for youth unemployment in many economies. Lastly, frictional unemployment occurs with the re-entry of job seekers into the workforce. These are people who stopped searching for jobs for various reasons such as stopping work to get married, raise children, or even take care of elderly relatives. During the period of re-entry, these job seekers remain unemployed until they secure the right opportunities. Frictional unemployment is mostly voluntary and short-term in nature.

Structural Unemployment

Structural unemployment is usually involuntary and long-term in nature. The main causes of structural unemployment are advances in technology and job outsourcing. These two causes result in long-term unemployment as they effectively alter the nature of job positions in the workplace. Advances in technology results in unemployment as computers and robots replace employees. The replaced workers require more training to enable them to gain new qualifications as their previous skills are rendered obsolete. Also, job outsourcing occurs when an organization moves its operations to another country where labor costs are cheaper. The NAFTA agreement, which was signed in 1994, resulted in numerous job losses in many states as companies outsourced their manufacturing operations to Mexico (Amadeo). Many American workers also lost their jobs as firms outsourced their operations in cheaper markets such as China and India.

Cyclical Unemployment

Cyclical unemployment primarily occurs during recession or periods of low economic activity. This type of unemployment is characterized by many applicants chasing after fewer job positions. Low consumer demand during recession causes firms to lay off workers resulting in large-scale unemployment. The financial crisis of 2008 is a recent example of how a recession in the economy can cause massive unemployment.

Effects of Unemployment

The effects of unemployment can be severe to the unemployed individual and his immediate family. Unemployment can have devastating consequences not only in respect to monetary loss but also to the health of the unemployed individual. Moreover, the impacts of unemployment linger for decades negatively affecting the quality of life of unemployed individuals and their families. The consequences of unemployment are severe to the economy, with a considerable impact on the GDP of a country.

Individual Consequences of Unemployment

The enduring effects of unemployment are both grave and long-lasting to the unemployed individual. In many instances, the earning potential of unemployed people declines as the unemployment duration persists. These individuals lose their source of income, resulting in a decline in their standard of living. Long-lasting impacts extend to the families of unemployed individuals due to the loss of a means of livelihood. The households are unable to sustain their previous lifestyles and also cater for essential needs such as housing, food, and clothing. The longer the unemployment period persists, the health consequences become more severe, with an increase in depression and worsening of health conditions over time (Gleeson). Also, unemployed people are more likely to experience social withdrawal, and thus they lose friends and self-esteem. The longer the unemployment duration goes, the unemployed workers lose their skills, and therefore it becomes difficult for them to gain meaningful employment again.

Social Effects of Unemployment

The main social consequence of unemployment is the increase in crime. Persons who are unable to secure employment due to socially unacceptable reasons are more likely to engage in robbery and burglary (Gleeson). The correlation between unemployment and crime rates is high among the youth, with the likelihood of crime increasing significantly among the young population.

Effects of Unemployment on the Economy

The impact of unemployment on the economy is immediate and evident. As joblessness increases, the government is forced to increase unemployment benefits payouts to cater for food benefits and Medicaid for the affected households. The budget for government aid rises as the rate of unemployment increases, nearing an estimate of $3 billion per month (Gleeson). Besides, an increase in unemployment consequently reduces the economic output of a country.

Conclusion

In summary, the paper has established a causal and effect relationship of unemployment. The causes of unemployment are diverse, as well as its effects. The steady increment in the rate of unemployment has been caused by several factors such as recession, low consumer demand, advances in technology, among others. Unemployment has severe consequences both at an individual and societal level. The economic effects of unemployment are equally critical, causing a decline in gross domestic product. The criminal effects of unemployment are evident, with an increase in crime rates. The causes and effects need to be addressed if the problem of unemployment is to be tackled effectively.

Works Cited

Amadeo, Kimberly (2019). "7 Causes of Unemployment." The Balance. Available from www.thebalance.com/causes-of-unemployment-7-main-reasons-3305596.

Gleeson, Patrick (2019). "The Overall Effects of Unemployment." Chron. Available from https://smallbusiness.chron.com/overall-effects-unemployment-37104.html.