Scribd
Upload
31 views3 pages

Unemployment For Macroeconomics

Uploaded by

bhujelaadesh7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
31 views3 pages

Unemployment For Macroeconomics

Uploaded by

bhujelaadesh7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

Unemployment

Meaning
Unemployment is defined as the non-availability of jobs for the people able and willing to work
at the existing wage rate. It can be voluntary and involuntary. It is voluntary unemployment if
the people are not unemployed due to their own choice and interest. It is involuntary
unemployment if the jobs are not available to them despite their ability and willingness to
work.
Types of Unemployment
a) Open Unemployment: Open unemployment is defined as the situation in which some
workers have no any work to do. They are willing to work at the existing wage rate but
they are forced to remain unemployed in the absence of work.
b) Underemployment: Underemployment is defined as the situation in which employed
persons are working but less than they are really capable of it. In this situation, people
do not get the job or work they are capable of doing or they are trained for.
c) Disguised unemployment: Disguised unemployment is defined as the situation in which
a person seems as employed but in fact he is not employed. In this type of
unemployment, the unemployed person is not visible or s/he is hidden That's why, this
type of unemployment is also known as the hidden unemployment. In this type of
unemployment, too many persons are involved in a work or persons are more than
actually required. This type of unemployment problem is found in agriculture sector of
developing countries.
d) Cyclical unemployment: Cyclical unemployment is defined as the type of unemployment
that results due to the operation of trade cycle or business cycle. When business or
economic activities are going down, aggregate demand decreases. For which, less
production is needed and consequently, fewer workers are needed. This results in
unemployment problem.
e) Seasonal unemployment: Seasonal unemployment is defined as the situation in which
people are out of work and looking for a job during the off-season. For example, ice-
cream vendors during the winters are out of work or they become unemployed.
f) Frictional unemployment: Frictional unemployment is defined as the situation in which
people are looking for new or better job and employers are looking for the right workers.
It is also known as the search unemployment because it occurs when people leave job
and searching for new job. The main cause of frictional unemployment is imperfect
information regarding job vacancies (demand for and supply of labor).
g) Structural unemployment: Structural unemployment is defined as the situation which
occurs due to the changes in structure of the economy. The main cause of structural
unemployment is a mismatch between the skills needed for available jobs. This kind of
unemployment usually exists in the developing countries like Nepal where
unemployment is basically structural in nature. Here, the large numbers of people are
unemployed because of underdeveloped structure of the economy. This can be solved
only through rapid economic development. It can also occur due to the introduction of
new technology in the production process. It replaces man with machines.
h) Educated unemployment: Educated unemployment refers to unemployment among the
educated people, i.e. matriculates and higher educated. This is the problem of both
developed and developing countries.
i) Hardcore Unemployment: The unemployment of physical handicapped workers is
known as hardcore unemployment. The causes behind hardcore unemployment are as
follows:
• Organizations are not ready to provide jobs to them.
• They are not capable of doing all jobs due to their physical disabilities.
This problem can be solved in the following ways:
▪ Reservation system to their jobs
▪ Provision of trainings on those skills by using which they can work
▪ Strong motivation of organizations to offer them jobs

Labor Force and Unemployment Rate


Labor Force: The total number of employed and unemployed workers is defined as labor
force.
Labor Force: Number of Employed Workers+ Number of Unemployed Workers
Unemployment Rate: Unemployment rate is defined as the % of the labor force that is
unemployed.
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑼𝒏𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒅 𝑾𝒐𝒓𝒌𝒆𝒓𝒔
Unemployment Rate= × 𝟏𝟎𝟎
𝑳𝒂𝒃𝒐𝒓 𝑭𝒐𝒓𝒄𝒆

Natural Rate of Unemployment


The natural rate of unemployment is the rate that exists when there is no cyclical
unemployment. It is the % of the labor force that is frictionally and structurally unemployed at
a point of time.
Costs of Unemployment (For 2 Marks)
1) Personal Costs (Loss of self-esteem, frustration)
2) Economic Costs (Loss earnings, lower GDP, loss of human capital, increase in poverty)
3) Social Costs (Disintegration of the family, theft, corruption, crime, prostitution,
dishonesty)
4) Costs to the Government (Increase in government expenditure)
5) Political Costs (Political instability)
Costs of Unemployment
o Economic Costs of Unemployment: The economic costs of unemployment are
associated with the earnings and living standard of unemployed workers. The
major economic costs of unemployment are as follows.
a) Loss of earnings: Unemployed people lose their earning or income,
which causes increase in poverty, inequality, lower living standard, etc.
b) Lower GDP: High unemployment means that the economy is operating
under full capacity and is inefficient. This leads to lower output and
incomes. This can also cause negative multiplier effect.
c) Loss of human capital: If people are unemployed, they miss out on the
job training. If someone is out of work for long time, s/he misses out
working practice and also loses confidence.
d) Increase in poverty: Unemployed people have no income. As a result,
s/he grows poor. Thus, unemployment generates poverty.
e) Burden to the government: If the large numbers of peoples are
unemployed, it is burden to the government because government has to
pay out benefit to support unemployed.
o Social Costs of Unemployment: There is high cost of unemployment to the
society. Unemployment creates many social problems like theft, corruption,
crime, prostitution, dishonesty, etc.
o Political Costs of Unemployment: Unemployment creates political instability in
a country. It is very easy to convince unemployed people against the
government. They think that government is worthless and it is doing nothing for
them.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy