Topic What are the causes and effects of unemployment Unemployment occurs when a person is able and willing to work but currently without work The prevalence of unemployment is usually measured using[.]
Topic: What are the causes and effects of unemployment Unemployment occurs when a person is able and willing to work but currently without work The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the labour force who are unemployed The unemployment rate is also used in economic studies and economic indices such as the United States’ Conference Board’s Index of Leading Indicators as a measure of the state of macroeconomics The causes of unemployment are disputed Keynesian economics emphasizes unemployment resulting from insufficient effective demand for goods and services in the economy (cyclical unemployment) Others point to structural problems and inefficiencies inherent in labour markets; structural unemployment involves mismatches between demand and supply of laborers with the necessary skill set, sometimes induced by technologies or globalisation Classical orneo classical economics tends to reject these explanations, and focuses more on rigidities imposed on the labor market from the outside, such as unionization, minimum wage laws, taxes, and other regulations that may discourage the hiring of workers (classical unemployment) Yet others see unemployment as largely due to voluntary choices by the unemployed and the time it takes to find a new job (frictional unemployment) Behavioral economics highlights phenomena such as sticky wages and efficiency wages which may lead to unemployment There is also disagreement on how exactly to measure unemployment Different countries experience different levels of unemployment; traditionally, the United States tends to experience lower unemployment levels than countries in the European Union,[2] although there is some variation there, with countries like the UK and Denmark outperforming Italy and France and it also changes over time (e.g the Great Depression) throughout economic cycles Types of unemployment Economists distinguish between various types of unemployment, including cyclical unemployment, frictional unemployment, structural unemployment and classical unemployment Some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment Real-world unemployment may combine different types The magnitude of each of these is difficult to measure, partly because they overlap Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, a simple distinction is often applied Voluntary unemployment is attributed to the individual’s decisions, whereas involuntary unemployment exists because of the socio-economic environment (including the market structure, government intervention, and the level of aggregate demand) in which individuals operate In these terms, much or most of frictional unemployment is voluntary, since it reflects individual search behaviour On the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature However, the existence of structural unemployment may reflect choices made by the unemployed in the past, while classical (natural) unemployment may result from the legislative and economic choices made by labour unions and/or political parties So in practice, the distinction between voluntary and involuntary unemployment is hard to draw The clearest cases of involuntary unemployment are those where there are fewer job vacancies than unemployed workers even when wages are allowed to adjust, so that even if all vacancies were to be filled, there would be unemployed workers This is the case of cyclical unemployment, for which macroeconomic forces lead to microeconomic unemployment Frictional unemployment Frictional unemployment is the time period between jobs when a worker moves from one job to another Frictional unemployment is an example of a productive part of the economy, increasing both the worker’s long term welfare and economic efficiency, and is also a type of voluntary unemployment Frictional unemployment is always present in an economy, so the level of involuntary unemployment is properly the unemployment rate minus the rate of frictional unemployment, which means that increases or decreases in unemployment are normally under-represented in the simple statistics Classical unemployment Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies Libertarian economists like F.A Hayek argued that unemployment increases the more the government intervenes into the economy to try to improve the conditions of those with jobs For example, minimum wage laws raise the cost of labourers with few skills to above the market equilibrium, resulting in people who wish to work at the going rate but cannot as wage enforced is greater than their value as workers becoming unemployed They believed that laws restricting layoffs made businesses less likely to hire in the first place, as hiring becomes more risky, leaving many young people unemployed and unable to find work Some, such as Murray Rothbard, suggest that even social taboos can prevent wages from falling to the market clearing level Some economists theorize that this type of unemployment can be reduced by increasing the flexibility of wages (e.g., abolishing minimum wages or employee protection), to make the labor market more like a financial market Cyclical or Keynesian unemployment Cyclical or Keynesian unemployment, also known as deficient-demand unemployment, occurs when there is not enough aggregate demand in the economy It gets its name because it varies with the business cycle, though it can also be persistent, as during the Great Depression of the 1930s Cyclical unemployment is caused by a business cycle recession, and wages not falling to meet the equilibrium level Cyclical unemployment rises during economic downturns and falls when the economy improves Keynesians argue that this type of unemployment exists due to inadequate effective aggregate demand Demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages not fall to meet the equilibrium level, and mass unemployment results Some consider this type of unemployment one type of frictional unemployment in which factors causing the friction are partially caused by some cyclical variables For example, a surprise decrease in the money supply may shock participants in society With cyclical unemployment, the number of unemployed workers exceeds the number of job vacancies, so that if even all open jobs were filled, some workers would remain unemployed This kind of unemployment coincides with unused industrial capacity (unemployed capital goods) Keynesian economists see it as possibly being solved by government deficit spending or by expansionary monetary policy, which aims to increase non-governmental spending by lowering interest rates In contrast, Austrian economists argue that government spending and policies are the root cause of economic cycles and cyclical unemployment and should be reformed or removed Classical economics rejects the conception of cyclical unemployment, seeing the attainment of full employment of resources and potential output as the normal state of affairs Structural unemployment Structural unemployment occurs when a labor market is unable to provide jobs for everyone who wants one because there is a mismatch between the skills of the unemployed workers and the skills needed for the available jobs.[10] Structural unemployment is hard to separate empirically from frictional unemployment, except to say that it lasts longer As with frictional unemployment, simple demand-side stimulus will not work to easily abolish this type of unemployment Structural unemployment may also be encouraged to rise by persistent cyclical unemployment: if an economy suffers from long-lasting low aggregate demand, it means that many of the unemployed become disheartened, while their skills (including job-searching skills) become “rusty” and obsolete Problems with debt may lead to homelessness and a fall into the vicious circle of poverty This means that they may not fit the job vacancies that are created when the economy recovers Some economists see this scenario as occurring under British Prime Minister Margaret Thatcher during the 1970s and 1980s The implication is that sustained high demand may lower structural unemployment This theory of persistence in structural unemployment has been referred to as an example of path dependence or “hysteresis” Much technological unemployment (e.g due to the replacement of workers by machines) might be counted as structural unemployment Alternatively, technological unemployment might refer to the way in which steady increases in labor productivity mean that fewer workers are needed to produce the same level of output every year The fact that aggregate demand can be raised to deal with this problem suggests that this problem is instead one of cyclical unemployment As indicated by Okun’s Law, the demand side must grow sufficiently quickly to absorb not only the growing labor force but also the workers made redundant by increased labor productivity Otherwise, we see a jobless recovery such as those seen in the United States in both the early 1990s and the early 2000s Seasonal unemployment may be seen as a kind of structural unemployment, since it is a type of unemployment that is linked to certain kinds of jobs (construction work, migratory farm work) The most-cited official unemployment measures erase this kind of unemployment from the statistics using “seasonal adjustment” techniques Long-term unemployment This is normally defined, for instance in European Union statistics, as unemployment lasting for longer than one year It is an important indicator of social exclusion Hidden unemployment Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed Those who have given up looking for work (and sometimes those who are on Government “retraining” programmes) are not officially counted among the unemployed, even though they are not employed The same applies to those who have taken early retirement to avoid being laid off, but would prefer to be working The statistic also does not count the “underemployed” – those with part time or seasonal jobs who would rather have full time jobs Because of hidden unemployment, official statistics often underestimate unemployment rates Full employment In demand-based theory, it is possible to abolish cyclical unemployment by increasing the aggregate demand for products and workers However, eventually the economy hits an “inflation barrier” imposed by the four other kinds of unemployment to the extent that they exist Some demand theory economists see the inflation barrier as corresponding to the natural rate of unemployment The “natural” rate of unemployment is defined as the rate of unemployment that exists when the labor market is in equilibrium and there is pressure for neither rising inflation rates nor falling inflation rates An alternative technical term for this rate is the NAIRU or the Non-Accelerating Inflation Rate of Unemployment No matter what its name, demand theory holds that this means that if the unemployment rate gets “too low,” inflation will get worse and worse (accelerate) in the absence of wage and price controls (incomes policies) One of the major problems with the NAIRU theory is that no one knows exactly what the NAIRU is (while it clearly changes over time) The margin of error can be quite high relative to the actual unemployment rate, making it hard to use the NAIRU in policy-making Another, normative, definition of full employment might be called the ideal unemployment rate It would exclude all types of Causes of frictional unemployment Frictional unemployment may be a result of the following reasons: Mobility of labour: People generally seek another job either because they are fired from the existing job or because they are they want to get a better job In the transition period they are unemployed Expansion of the Labour force Every year more and more individuals join the labor force During the phase of their job search they are unemployed Many economists have termed frictional unemployment a sign of economic well being Frictional unemployment can exist only in a fast growing economy where the labor force is expanding, mobile, flexible and adaptable People generally seek another job either because they are fired from the existing job or because they are they want to get a better job In the transition period they are unemployed Expansion of the Labour force Every year more and more individuals join the labor force During the phase of their job search they are unemployed Many economists have termed frictional unemployment a sign of economic well being Frictional unemployment can exist only in a fast growing economy where the labor force is expanding, mobile, flexible and adaptable Labour mobility In the presence of perfect information and mobility of labor, people out of job can easily find in an industry, which is in need of labor This way, structural unemployment may be reduced Structure of the regional economy If certain industries are closing down then it may so happen that industries may get concentrated in a certain part of the nation This may make employment difficult and increase the resulting structural unemployment High Gross Domestic Product, it is seen, is not indicative of a low structural unemployment : The main reason for the high level of unemployment is technological progress Don’t get me wrong; progress is good and it makes life easier But if every year we produce the same amount of goods with fewer people — in a few years far less working hours are needed to produce all the goods that are required The historical trend has been to use less and less working hours per week If we not continue this trend, the supply of working hours is greater than the demand An oversupply of working hours means they are worth less, wages and salaries get reduced Also many persons are out of work; their working hours are no longer needed Those that are out of work have no income and therefore the demand for goods goes down With fewer sales, less gets produced, more persons are laid off This is a vicious circle that accelerates unemployment and produces crime; because some will turn to crime to obtain income Causes Of Unemployment In Pakistan: Economy of an individual is at the utmost priority of every democratic as well as welfare state Since the dawn of human history, individual needs have been prioritized by every human being These individual needs can be met by proper sources of employment After the transformation of the world from a feudal to an industrial society, the needs of an individual have risen sharply, giving due importance to finance.In Pakistan, due to gigantic rise in population, individual finances have been disturbed a lot This is because of rising unemployment The major cause of unemployment in Pakistan are following The first cause of unemployment or joblessness in Pakistan is worsening law and order situation Owing to this negative social phenomenon, foreign direct investment is sliding down to the bottom According to the economic survey of Pakistan, in the current decade FDI was minimum last year.Also investors are loosing confidence in the political and economic system of the country therefore they are reluctant to invest in any new business venture Resultantly, new jobs are not generating while the job seekers are rising continuously in the country Secondly, Agriculture is account for the maximum job provision in the country Agriculture sector is facing severe challenges of water shortage, climatic changes and technological backwardness in recent years These factors have hit the per acre yield negatively which caused loosing of jobs of several people In 2009-10, agriculture showed a growth of only 2% against the target of 3.8% while nearly 62% of Pakistan population is living in rural areas, and is directly or indirectly linked with agriculture for their livelihood Thirdly, Industry is also a heaven for educated as well as semi-educated labour force in the country Pakistan industry is short listing its labour because of gradual decrease in demand as well as acute energy shortage Energy shortfall crosses 5500 MW at time causing severe damage to production capacity Fourthly, World economic depression coupled with American war against Terror has also put negative impacts on our economy It has not only doubled our expenditures on military front but also defaced Pakistan’s image in international arena These factors have put international investment in Pakistan at risk Therefore, Pakistan is not attracting new investment causing unemployment in the country Fifthly, United States of America spent 368 billion in 2007 on research and development whereas Pakistan’s attention towards this sector is the least By spending on education and research, we can create more specialized fields thus generating more jobs In the 2010 budget, Pakistan has earmarked only 2% of its GDP on education which is the lowest in whole of the region Sixthly, Population increase is also a cause of unemployment in Pakistan Till 2010, Pakistan’s population is 173.54 million wheras most of the population is unable to survive in the financial race because of illiteracy In Spite of these factors poor governance, deep rooted corruption, faulty educational system, lack of quality educational institutions and feudalism are also aggravating the situation further Finally, we can hold the government responsible for the its poor performance in financial sector Poor governance have marred the performance of our economic sector by every side and government has taken only cosmetic measures to redress the problem Dr Ishrat Hussain suggestions to improve the governance have been put on the backburner Economy of an individual is at the utmost priority of every democratic as well as welfare state Since the dawn of human history, individual needs have been prioritized by every human being These individual needs can be met by proper sources of employment After the transformation of the world from a feudal to an industrial society, the needs of an individual have risen sharply, giving due importance to finance.In Pakistan, due to gigantic rise in population, individual finances have been disturbed a lot This is because of rising unemployment The major cause of unemployment in Pakistan are following The first cause of unemployment or joblessness in Pakistan is worsening law and order situation Owing to this negative social phenomenon, foreign direct investment is sliding down to the bottom According to the economic survey of Pakistan, in the current decade FDI was minimum last year.Also investors are loosing confidence in the political and economic system of the country therefore they are reluctant to invest in any new business venture Resultantly, new jobs are not generating while the job seekers are rising continuously in the country Secondly, Agriculture is account for the maximum job provision in the country Agriculture sector is facing severe challenges of water shortage, climatic changes and technological backwardness in recent years These factors have hit the per acre yield negatively which caused loosing of jobs of several people In 2009-10, agriculture showed a growth of only 2% against the target of 3.8% while nearly 62% of Pakistan population is living in rural areas, and is directly or indirectly linked with agriculture for their livelihood Thirdly, Industry is also a heaven for educated as well as semi-educated labour force in the country Pakistan industry is short listing its labour because of gradual decrease in demand as well as acute energy shortage Energy shortfall crosses 5500 MW at time causing severe damage to production capacity Fourthly, World economic depression coupled with American war against Terror has also put negative impacts on our economy It has not only doubled our expenditures on military front but also defaced Pakistan’s image in international arena These factors have put international investment in Pakistan at risk Therefore, Pakistan is not attracting new investment causing unemployment in the country THÔNG TIN HỎI ĐÁP: Trong trình làm Essay, bạn muốn tìm kiếm thêm nhiều tài liệu mẫu, cách làm Essay cập nhật Trung tâm Best4Team Liên hệ dịch vụ thuê viết essay tiếng anh Hoặc qua SĐT Zalo: 091.552.1220 email: 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