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What Causes Unemployment? | Here are the Answers
Do you think that you are overworked today?
What would you consider to be a normal working week? 35 hours, 40 hours, 50 hours? As a matter of fact, up until the 19th century, people on averaged worked between 70 and 80 hours per week.
70-80 hours per week!
Today, in Greece, the average person works nearly 40 hours per week, whereas in Germany this is 35.6 hours.
However, these days more people are working in office environments, and we still tend to work a large proportion of our daytime hours. This has some serious psychological and physical effects. Today, there are record levels of depression and anxiety-related disorders; and the same goes for back pain, which is often induced by RSI (repetitive strain injury, like working at a desk).
Some jobs, like working in construction, can be physically demanding and hazardous. It’s no secret that working too long can cause people to become tired, and as a result, unhealthy. To top it off, if you’re not satisfied in your work, then this can lead to serious psychological consequences – and it can affect labour markets too.
However, what is more damaging to somebody than an unsatisfying job?
No job at all. Unemployment is a key macroeconomic indicator, and for good reason.
Without confidence at work, consumers won’t have confidence to buy goods and services. Without consumer confidence comes a lack of business confidence. Without business confidence comes a lack of profits, a lack of investment, an increase in redundancies and a decrease in corporation taxes paid to the government. It’s a spiral, and we are all connected, whether we like it or not.
To study the causes of unemployment, we need to divide it up into a few areas. But firstly, let’s look at the technical defintion of unemployment.
‘The unemployment rate can be defined as the number of people as a percentage of the labour force (those who are willing and able to work at current market wage rates) who cannot find jobs.
Here are 3 kinds are unemployment:
1. Frictional unemployment – the type of unemployment caused when people search for new opportunities. This is the unemployment when workers are ‘between’ jobs. It’s not too hazardous for the economy, but it can be if there is a serious lack of information and people cannot find the work they’re looking for.
2. Structural unemployment – the type of unemployment where workers do not have the right skill sets to find jobs. This often happens when machines replace workers (often called technological unemployment) or when work gets offshored to developing countries. This is particularly problematic, as retraining people can take a long time, and many people are often unwilling to do it, so they go to the benefits system instead. Specifically, it is an issue for middle-aged people who have been made redundant and must retrain in a particular field.
3. Cyclical unemployment – this is the type of unemployment caused when there is a serious lack of demand in the economy. This is caused by the economic cycle, so it is caused by recessions (it’s also called recessionary unemployment). This type of unemployment is usually able to be controlled and ironed out over the long-term through a good use of government demand-side policies. An example of cyclical unemployment is the Great Depression which began in 1929. In summary, it is when people want to work, but there is a lack of jobs available as most businesses are having a bad year financially.
While devastating for an economy, knowing a little more about what causes unemployment, can help economists determine policies to help combat it.
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