Unemployment in Macroeconomic Theory - Essay Example

College Unemployment Unemployment is an issue that has been affecting many people in the society. It has caused many challenges in most countries more especially in developing countries. It is high time to understand deeply the meaning of this issue and its possible causes. Despite unemployment being an issue in the society, it has also been a big problem in macroeconomics. In macroeconomics, unemployment is viewed as the central issue. This is because market economy cannot stay for a long time if unemployment rate goes high. Unemployment is viewed occur mainly from the labor markets. Therefore, a big question is what are the types of unemployment in macroeconomics? What are the main causes of these types and the possible solutions? Unemployment is situations where people who get job they are searching. These people do have any income. They have to look for other options that will help them get jobs. Unemployment can either be voluntary or involuntary. Voluntary unemployment is where one renders himself or herself jobless knowingly. This is caused by many factors both economical and in the markets. There are many types of unemployment caused by some factors. One of the types of unemployment is the structural unemployment. This is a type of unemployment where capital labor situations make people to be unemployed. These capital labor situations reduced labor demand. Structural unemployment always occurs when the new job vacancies mismatch with the skills that are available. The skilled people will not get chances in the job opportunity because their skills will be considered irrelevant. The job opportunity required employees will relevant skills in order to maximize output. One can be employed in a certain industry but lose the job after sometime (Wessels, 93). The main cause of this is because may be the industry has improved and want to change the way it operates. The industry may new high skills from the current employees. If the employees do not go for further training, they will find themselves jobless because their skills will no long remain relevant to the industry. This problem where employees are not able to learn new skills in the industry is referred to as occupation immobility. An example of this unemployment is a situation a farmer may want to be employed information Technology Company. The farmer will not get the job of the mismatch skills. Another cause of structural unemployment is the geographical immobility. This is a situation where an individual is not able to move to another place for a job opportunity. He or she mays decided to remain jobless due to the fact that he or she cannot move to another geographical area even if a job is guaranteed. Some of the reasons behind are family’s issues or health issues. One can leave a job opportunity and remain close to the family. Change in technology can also cause structural unemployment. This is because some people are resistant to change. When new technology is introduced, they find it difficult to adapt to its use. Some are forced to quit their jobs due to the technology illiteracy. However, structural unemployment issue can solved if people accept to go for retraining if they want to be considered in re-employment. People searching for jobs should also accept to change their geographical locations if the job opportunity demands them to. Furthermore those who are working in technology driven companies should be able to adjust to the changes in technology. Another type of unemployment is the frictional unemployment. This type of unemployment occurs when one leaves the current and become unemployed when he or she is still looking for another job. Some can leave their jobs just to have time to relax themselves (Wessels, 93). The main cause of this type of unemployment is the movement of people between jobs, locations or careers. One of the cause of this unemployment is when someone is fresh from college and do not understand the labor markets. The graduate will be expecting to get a better paying job. During this time for looking for a job, the university graduate will remain unemployment. This type off unemployed is considered a voluntary one becomes one can decide to leave the current job and become unemployed while searching for another. Some can volunteer to leave their job due to change of interests in terms of job opportunities. Others can leave their cities and move to others. During the arrival time, they will be unemployed. Cyclic unemployment is another type of unemployment (Wessels, 93). This is the most volatile type of unemployment. .it is not a voluntary type like the rest discussed above. It is caused by lack of goods and services demand. It is sometimes referred to as demand deficient unemployment because it is related to the economic capacity. It always occurs when GDP growth rate moves in moves in different direction with the rate of employment. When the growth in GDP falls, the rate of unemployment goes up. This is always witness during economic recessions. During this time, the demand of goods and services goes down. The rate of employment also goes down. This will increase the number of the unemployed people in the country. This cannot be controlled by one person. The government has to intervene in order to control this type of unemployment. There are measures that must be put in place in order to solve this issue of cyclic unemployment. One of the measures includes increasing government spending. This can be combined with tax reduction. The government should use a lot of money in employing more workers in most of the government sectors. The reduced taxes will encourage many people to work. These workers should also earned relevant income from the government. Another measure of solving cyclic unemployment is by reducing interest rates in the country. This encourages many people to invest in many areas. Reduced interest rates also encourage consumption rate (Wessels, 96). Real wage unemployment is another type of unemployment that is witnessed in many countries. Real wage unemployment mainly occurs when some trade unions go on strike when their demands are not settled. This demand is on wage increase. If this demand is not considered, it will lead to strikes which eventually make some employees lose their jobs. Strikes cause labor demand fall. The government and the other institutions involved are not able to employ more workers. This will render many people jobless thus increasing the rate of unemployment. Seasonal unemployment is the one that occurs during some seasons of the year. There are some seasons in the year when the rate of employment is very high while in some season it is very low. An example is during winter, the rate of unemployment in the hotels is very high. This is caused the reduced number of customers as recorded in the hotels compared to the number that is recorded during summer holidays. Most of the industries affected by this seasonal unemployment are the hotel industries. There are many effects that caused by unemployment. These effects can either be direct or indirect. One of the direct effects includes losing personal income. The unemployed population does have money to sustain their live. This results in low living standards. More time I also wasted by the unemployed population since they have nothing to do. This issue is also associated other issues like increased crimes and insecurity due to large number of idle people. Unemployment also leads to decrease in national input. This is because when few people are employed, labor input becomes small. Since labor is factor of production, its reduction leads to reduction in national production (Wessels, 99). There are other indirect effects that are brought about by high rate of unemployment. One of these effects is the reduction in tax revenue. When a few people are employed, the tax collected becomes minimal. This will not be enough to cater for country’s budget. The wages to be taxed will not be enough to contribute the estimated amount of revenue required. The government will be forced to raise tax levels on the working population. This discourages workers from their jobs. Unemployment also will create some inequalities when it comes to the wealth in the society. The differences in wealth and income cause many cases like crimes and other negative effects in the society. These problems can be solved if the government if ensures that many people are employed and are earning reasonable amount of income (Wessels, 103). Unemployment in economics is one the issues that must be addressed keenly. They are many types and each one its cause and possible solutions. This issue must be addressed must each countr4y in order to ensure economic development. If this issue is not addressed well, there consequences those are associated with it. It is very important to identify its causes earlier. Work cited Wessels, Walter J. Economics. Hauppauge, N.Y: Barron's, 2006. Print. Measuring the Cost of the Fear of Unemployment: an Information Approach. Wiley- Blackwell Publishing Ltd, 1999. Internet resource. Read More