Unemployment: Meaning, Definition, Types, and Causes

What does it mean by Unemployment? Unemployment, as defined by the International Labor Organization, occurs when people are without jobs and they have actively looked for work within the past few weeks. This article explains Unemployment in its Meaning, Definition, Types, and Causes. They define it as a situation where someone of working age is not able to get a job but would like to be in full-time employment.

What is Unemployment? explain into; Meaning, Definition, Types, and Causes.

It is a term referring to individuals who are employable and seeking a job but are unable to find a job. Furthermore, it is those people in the workforce or pool of people who are available for work that does not have an appropriate job.

Usually measured by the unemployment rate, which is dividing the number of unemployed people by the total number of people in the workforce, they serve as one of the indicators of an economy’s status. The detailed study of any subject must always start by understanding the definition of the subject at hand. This is because the definition has profound implications for the way the study of the subject stands conducted.

The study of unemployment [Hindi] is a classic example of this case. We often come across the statistics which exist stated in the newspaper and make certain assumptions. However, in this article, we will have a closer look at the definition of unemployment and see why the assumptions could be wrong.

Definition of Unemployment:

The labor force consists of all persons working and all persons though not working, are searching for work. One who is not in the labor force cannot be the employee. What is the definition of unemployment?

According to A.C. Pigou;

“Unemployment means, all those who are willing to work are not able to find a job.”

Unemployment may define as;

“A situation in which the person is capable of working both physically and mentally at the existing wage rate, but does not get a job to work.”

The official definition of unemployment is as follows: They occur when a person who is a participant in the labor force and is actively searching for employment is unable to find a job. Economists describe them as a condition of jobless within an economy. It is a lack of utilization of resources and it eats up the production of the economy.

It can conclude that unemployment inversely relates to the productivity of the economy. They generally define it as the number of persons (It is the percentage of the labor force depending on the population of the country) who are willing to work for the current wage rates in society but do not employ currently.

They reduce the long-run growth potential of the economy. When the situation arises where there are more other resources for the production and no manpower leads to wastage of economic resources and lost output of goods and services and this has a great impact on government expenditure directly.

Types of Unemployment:

The following types of Unemployment below are;

1] Educated:

Among the educated people, apart from open unemployment, many stand underemployed because their qualification does not match the job. The faulty education system, mass output, preference for white-collar jobs, lack of employable skills, and dwindling formal salaried jobs are mainly responsible for them among educated youths in India. Educated they may be either open or underemployed.

2] Frictional:

It is a temporary condition. This unemployed occurs when an individual is out of his current job and looking for another job. The period of shifting between two jobs exists known as frictional unemployment. The probability of getting a job is high in a developed economy and this lowers the probability of frictional unemployment. There are employment insurance programs to tide over frictional unemployment

3] Structural:

Structural it occurs due to the structural changes within an economy. This type of unemployment occurs when there is a mismatch of skilled workers in the labor market. Some of the causes of structural are geographical immobility (difficulty in moving to a new work location), occupational immobility (difficulty in learning a new skill), and technological change (introduction of new techniques and technologies that need less labor force).

Structural unemployment depends on the growth rate of an economy and also on the structure of an industry. This type of unemployment arises due to drastic changes in the economic structure of a country. These changes may affect either the supply of a factor or demand for a factor of production. Structural employment is a natural outcome of economic development and technological advancement and innovation that are taking place rapidly all over the world in every sphere.

4] Classical:

The next Classical unemployment type stands also known as the real wage or disequilibrium unemployment. This type of unemployment occurs when trade unions and labor organizations bargain for higher wages, which leads to a fall in the demand for labor.

5] Cyclical:

Cyclic unemployment when there is a recession. When there is a downturn in an economy, the aggregate demand for goods and services decreases, and the demand for labor decreases. At the time of recession, unskilled and surplus laborers become unemployed. Read about the causes of the economic recession.

It causes trade cycles at regular intervals. Generally, capitalist economies are subject to trade cycles. The downswing in business activities results in unemployment. Cyclical unemployment is normally a shot-run phenomenon.

6] Seasonal:

A type of unemployment that occurs due to the seasonal nature of the job exists known as seasonal unemployment. The industries that stand affected by seasonal unemployment are the hospitality and tourism industries and also the fruit picking and catering industries. It is unemployment that occurs during certain seasons of the year.

In some industries and occupations like agriculture, holiday resorts, ice factories, etc., production activities take place only in some seasons. So they offer employment for only a certain period in a year. People engaged in such types of activities may remain unemployed during the off-season.

Causes of Unemployment:

There are several causes of unemployment and it depends on prevailing conditions of the economy and also on an individual’s perception. The following are some of the causes of unemployment:

• Technology change is one of the serious causes of unemployment. As technology changes employers search for people with the latest technical caliber. They look for better substitutes. Job cuts due to changes in technology bring problems to society.
• A recession is a prime factor for unemployment in most countries. The financial crisis in one country can affect other countries’ economies due to globalization.
• Changes in global Markets are another important factor. Any country’s economy is adversely affected when its exports are down the line due to changes in global markets, and a price increase. With this production suffers and companies are unable to pay on time and this increases the rate of unemployment.
• Job dissatisfaction by many employees is another cause, this happens when less attention is given by the employers to the performance of the employee. This leads to a lack of interest and desire to work and they become inevitable, as employees deliberately lose their jobs.
• Employment discrimination based on caste, religion, race, etc., in the companies, an employee loses the ease to work in the organization.
• A negative attitude by the employees toward employers creates an unhealthy environment in the organization. And this ultimately leads to unemployment.

Challenges of Unemployment:

The following challenges of unemployment below are two types;

1] Challenges to Individuals;

It is not only the responsibility of the government to take initiation in reducing the unemployment problem; but, even individuals also have to take the step to overcome this problem. A lot of adjustments are to be done by the individuals to come out of this situation.

Without taking hasty decisions like suicide, the frustration they can plan and do proper adjustments like debt adjustments, expend their liquid assets when it is required, cut down their expenditures, and also encourage other family members to find jobs so that they can compensate in income generation.

An individual has to increase their capabilities and participate in proper counseling; and, training sessions to improve their performance levels and enhance their skills. They have to think about self-employment apart from their job with the help of their family members. This also improves their standard of living.

2] Challenges to Government;

Several policies have been made to reduce the unemployment problem in the economy. Government just needs to focus on the execution of these policies and work out hard in alleviating this problem. The government can expand capital projects like new roads, construction of new hospitals; and, major infrastructural projects which can become a platform for the creation of more jobs in the economy.

It increases income generation for the economy. Reduction in taxation can bring higher purchasing power to consumers. It gives some relaxation to consumers in spending their disposable income. The government should take proper steps in investment decisions on huge projects like iron and steel, aviation, etc., proper policies are to be made to boost up these projects thereby creating employment opportunities.

Proper recruitment, training, and development are needed by every company to increase the capabilities of employees, enhance their skills, and show great performance in the upbringing of the organization. The government can take initiation in reducing the interest rates and it enhances the demand for credit and improves savings by the individuals. Necessary steps are to take by the government in increasing the productivity for the overall development of the country and reducing the unemployment problem in the economy.