Unemployment is also known as joblessness. It is when people are without a job and are actively seeking employment. When the economy drops, there is a high rate of unemployment. One of the major social issues in India is unemployment. Its infrastructure is poor. Which is actually the main reason for India’s unemployment situation. According to the Indian Government, India had 31 million jobless people. In Assam, the case of unemployment is also worst. The highest number of unemployed have their names registered in Guwahati which is almost 3 lakh.
Our education system is primarily concerned with quality and knowledge more than our skills. So, when facing interviews, students find themselves lacking in confidence and skills. The rapid growth of population, low productivity, and no proper economic planning are also some of the reasons for unemployment. The world has changed in the last few months. As many countries went under lockdown and practiced social distancing due to the pandemic. There was uncertainty about its impact on people’s lives. The COVID-19 crisis had led to an economic loss to many countries. The pandemic left millions of migrant workers unemployed.
Types of Unemployment
- Classical: is when real wages for jobs are set above the market level. It causes a number of job seekers to be higher than the number of vacancies.
- Repititive: occurs when there is not enough demand in the economy to provide jobs for all. Demand for goods and services decreases. Less production is needed, and fewer workers are needed.
- Structural: occurs when the labour market is not able to provide jobs for everyone. There is a mismatch between the skills of the unemployed workers and the skills needed for available jobs.
- Frictional: the time period in between jobs when a worker is searching for work or transitioning from one job to another.
Effects of Unemployment
When unemployment rates are high, there are negative impacts on economic growth. Unemployment wastes resources, increase poverty, limits labor mobility, etc. The effects of unemployment are of three types:
- Individual: people who are jobless cannot earn money to meet their daily needs. Unemployment can lead to homelessness, illness, and mental stress. It can also cause underemployment where workers take on jobs that are below their skill level.
- Social: an economy that has high unemployment is not using all of its labour force. When individuals accept employment below their skill level the economies efficiency reduses further. Workers lose skills which causes a loss of human capital.
There are numerous solutions that can help reduce the amount of unemployment:
- Demand side solutions: Many countries aid unemployed workers through social welfare programs. They receive benefits like insurance, compensation, welfare, and subsidies. An example of a demand side solution is government fund employment of the able-bodied poor.
- Supply side solutions: The labour market is not 100% efficient. Supply side solutions removes the minimum wage and reduce the power of unions. Examples of supply side solutions include cutting taxes on businesses etc
Full employment is often seen as an “ideal” unemployment rate. Only some frictional and voluntary unemployment exists. Where workers are temporarily searching for new jobs. Ideal unemployment promotes the efficiency of the economy.
Frictional Unemployment: It is when a worker is searching for a change from one job to another. It occurs when there is no match between the workers and jobs. The mismatch can be related to payment, work time, location, and other factors. It is influenced by voluntary decisions of an individual. Valuation of their own work and how that compares to current wage rates as well as the time and effort required to find a job.
Cyclical Unemployment: Cyclical unemployment occurs when there is not enough demand in the economy. In order to provide jobs for everyone who wants to work. In an economy, demand for most goods falls less production is needed, and fewer workers are needed.