Causes and Effect of unemployment.

By sunny6877 • 2 months ago • 2808 views • 872 comments
Causes and Effect of unemployment.


Unemployment generally defined as the number of persons (It is the percentage of labor force depends on the population of the country) who are willing to work for the current wage rates in society but not employed currently. Unemployment reduces the long run growth potential of the economy. When the situation arises where there are more other resources for the production and no man power leads to wastage of economic resources and lost output of goods and services and this has a great impact on government expenditure directly (Clark, 2003).

High unemployment causes less consumption of goods and services and less tax payments results in higher government borrowing requirements. The impact of the unemployment is seen with the individuals and household curtailing the consumption drastically to meet financial obligation and factors like this have adverse impact on the whole economy. It also reduces the output of goods and services which could have produced by unemployed labor force. An economy is producing substantially below its potential if unemployment rate is extremely high, thus everybody in the society loses by consuming and enjoying less because less is produced for distribution.

Many economists (Anderson, 2006) have done research studies to alleviate this problem and to find solutions. In this study we will discuss about the causes for unemployment, challenges to government and individuals to alleviate this problem. This report gives you the overview of the social effects of unemployment and the challenges ahead for the situation.


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

Change in technology is one of the serious cause for unemployment. As the technology changes employers search for people with latest technical caliber. They look for better substitutes. Job cuts due to change in the technology brings unemployment problem in the society.

Recession is prime factor for unemployment in most of the countries. Because of the financial crisis in one country can affect the other countries economy due to globalization.

Changes in the global Markets are another important factor. Any country economy adversely affect when its exports are down the line due to changes in global markets, and increase in price. With this production suffers and companies 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 given by the employers on the performance of employee. This leads to lack of interest and desire to work and unemployment becomes inevitable, as employees deliberately loose their jobs.

Employment discrimination based on the caste, religion, race etc., in the companies, an employee looses the ease to work in the organization.

Negative attitude by the employees towards the employers creates unhealthy environment in the organization. And this ultimately leads to unemployment.


Effect on Economy

Unemployment rate depends on the economy to economy. In developed countries like United Sates and Europe the unemployment rate considered to be low because many people are self employed people and working in agriculture. In countries where there are less self employed and more population with less resources causes unemployment (Anderson, 2006).

Unemployment affects the economy adversely as the productivity falls below the normal level. When there is high rate of unemployment in the country, government has to suffer extra borrowing burden due to decrease in the production and less consumption of goods and services by the people. Not only the unemployed people consume less its even employed has weak purchasing power due to fear about their loss of their jobs.

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