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Unemployment - Essay Example

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Unemployment can be voluntary or involuntary. Voluntary unemployment is associated with individual’s choices such as decisions to reject low paying jobs. Involuntary unemployment, on the other…
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Unemployment al affiliation Unemployment occurs where individuals are willing to work but are not employed. Unemployment can be voluntary or involuntary. Voluntary unemployment is associated with individual’s choices such as decisions to reject low paying jobs. Involuntary unemployment, on the other hand, arises because of socio economic factors such as the level of aggregate demand and government regulations. Unemployment has a negative effect on the economy and the quality of life of its citizens. Since unemployed individuals do not have a source of income, they cannot meet their financial needs. This increases exposure to malnutrition, disease and depression. An economy with a high rate of unemployment has increased rates of crime and social problems. High unemployment rates can also cause civil unrests and may result in the collapse of an economy (Hobson, 2013).
Unemployment is a general term that explains the lack of work by individuals who are willing to work. However, unemployment can be divided into three types. These are cyclical, structural and frictional unemployment. Structural unemployment occurs where the skills required for the available work does not match with the skills of those seeking work. It can also occur due to a long-term decline in demand. Seasonal employment is also a form of structural unemployment because it is associated with certain type of work. Both the occupational and geographical immobility of labor can also cause this type of unemployment. Cyclical unemployment is involuntary and occurs when the aggregate demand in an economy does not match the number of individuals seeking work. In this type of unemployment, there is a reduction in the demands of goods and services, which reduces production, and the number of works needed to satisfy demand. Frictional unemployment occurs where and individual is changing from one job to another. This type of unemployment exists in every economy because of the diversity of the skills of the workers as well as the work available. Frictional unemployment also occurs due to the entry of new graduates to the job market (Winkelmann, 2014).
There are for major cause of unemployment. These are minimum wage policies, efficiency wages, labor unions and job search. The implementation of minimum wage policies by the government results in the demand of more wages by individuals below the minimum wage level. This results in the demand of more wages by those above the minimum wage level. Because of increased costs in labor, firms will reduce the number of workers in order to recover for the increased wages. Increasing the minimum wage levels, therefore, increases the rate of unemployment. The activities of labor unions, particularly the push for increased benefits, improved working conditions and increased wages has a similar effect to increasing the levels of minimum wages. Efficiency wages result where firms pay their worker above the equilibrium wage, which increase the number of individuals willing to work for these positions. Although efficiency wages increases the wages for the employed individuals, it raises the unemployment rate. Job searches also cause unemployment because finding work may take time and this result in frictional unemployment (Hobson, 2013).
Unemployment can be mitigated with either demand side solutions or supply side solutions. Demand side solutions involve increasing the demand of labor through the increase in the demand for goods and services. An increase in the demand for goods and services can be achieved by increasing wages, providing aid to individuals who are unemployed, and government aided employment. Supply side solutions involve the elimination of minimum wage policies and reduction of the involvement of trade unions in wage issues (Winkelmann, 2014).
Reference list
Hobson, J. A. (2013). The economics of unemployment. Routledge.
Winkelmann, R. (2014). Unemployment (pp. 6766-6767). Springer Netherlands. Read More
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