By: Asaad Ali Khan

Unemployment is when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy and it is also one of the four main objectives of an economy to keep it to a minimum The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force. Unemployment is when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy and it is also one of the four main objectives of an economy to keep it to a minimum The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force.

There are three main causes of unemployment, they are 1. cyclical unemployment 2. structural unemployment 3. frictional unemployment

It is unemployment arising from a lack of aggregate demand. Demand for most products are likely to be low and unemployment may be high. Since not a lot of people are buying a product, firms do not need as much labor and will reduce it leading to unemployment. This in turn will lower disposable income and decrease demand for certain products, hence its cyclical title.

While cyclical unemployment arises due to the demand of labour, problems may also arise from the supply of labour. It may be that although there are job vacancies, employers are unwilling to employ because the people who applied lack sufficient skills. It may also be the case that there is a high level of immobility of labour. Example: if there are job vacancies in one part of a country, but the vast majority of the unemployed live in another part. While cyclical unemployment arises due to the demand of labour, problems may also arise from the supply of labour. It may be that although there are job vacancies, employers are unwilling to employ because the people who applied lack sufficient skills. It may also be the case that there is a high level of immobility of labour. Example: if there are job vacancies in one part of a country, but the vast majority of the unemployed live in another part.

This is short-term unemployment occurring when workers are in-between jobs. This is not as serious as the previous causes of unemployment because it lasts for a shorter amount of time. Frictional unemployment however is always likely to exist within an economy. This is because it may be a seasonal job such as ice-cream sellers.

There are six main consequences of unemployment The consequences of unemployment

Having people who are willing but unable to work is a waste of resources. A country is therefore not maximizing its output so living standards and international competitiveness is lower than what it should be.

Unemployment means that there is a lower revenue gained from income tax. The potential tax revenue could be spent on improving healthcare or education. Such spending would increase the productivity of the country and the general living standards.

Spending on job seeker’s allowance will go up the more people there are that are unemployed. This represents a larger opportunity cost which could limit the spending on key areas such as health.

Greater unemployment may also lead to more crime or mental health problems, which requires more government spending to solve.

The unemployed may suffer from social disadvantages and will suffer from a loss of income. There may be increased arguments within households and/or a sense of worthlessness and aimlessness. Children of the unemployed will struggle at school because they may have less access to tools needed at home.

It is unemployment causing unemployment. The longer someone is unemployed, the more likely that employers will see them as unemployable. This is because staying out of work for a long time indicates that they may not be good workers. Also, employers may become rusty and out of touch with advances in methods and technology.