10 Causes of Unemployment – Reasons for Unemployment

Unemployment has become a rising concern in the economy and there are many Causes of unemployment which are all studied in this article. In today’s world, it is difficult to maintain a good position in the corporate world. Not only corporate, but most sectors of the working economy are also facing a lack of job opportunities.

Unemployment is an issue that all the governments of the world are trying to tackle.

It is not just the developing nations- even the developed superpowers often find themselves powerless against unemployment.

Many people are forced to get the jobs that they do not want. This situation results in a decrease in productivity and a lack of willingness to work. The same also brings down the quality of work in the market and results in inefficient service members.

In this article, we shall try to discuss the various facets of unemployment and understand what the causes of unemployment are –

Meaning of Unemployment

People are often misled into believing that unemployment is an increase in the number of people who are not working. It is far from the real definition of unemployment.

In general terms, unemployment refers to the people who are out of job or work.

Unemployment also indicates the number of people who are willing to work. However, they cannot find a job that suits their interests and skill. It is a percentage of the total population. The following formula calculates it-

The formula for Calculating Unemployment Rate

(Number of unemployed people/ Total workforce) x 100 = Unemployment Rate

While taking this definition into mind, we eliminate the people who are not willing to work.

We also do not include the people who are disabled, retired from work, or who do not have the job that they need, although they are willing to work.

An example might include all such people who have to take care of their families or college students. In this post, we will be covering different types of unemployment and their causes-

Causes of Unemployment

1) Causes of Rural Unemployment

In developing nations, more than 50 percent of the population lives in rural areas. For the rural community, agriculture is the primary job for the people. Rural people do not get the right agricultural jobs, plus they do not get the proper access to education and skills required for getting top-level positions.

Causes for Rural Unemployment

• Population explosion
• Limited land and more significant pressure on an area
• Seasonal nature of agriculture
• Lacking village industries and subsidiary
• Absolute dependence on nature
• Traditional and un-advanced methods of agriculture
• Lacking adequate means of irrigation
• The habit of staying at home

2) Causes of Frictional Unemployment

It is a special kind of unemployment. It is also known as search unemployment. It refers to the time gap that occurs when a person shifts from one job to the next.

A person who leaves a company or an employed position isn’t immediately employed. It takes some time for them to find another job that suits their interests and set of skills. It might take a week, a month or a year.

During this time, people are capable of working and find jobs but do not accept them because they are willing to work for something better.

Cause of Frictional Unemployment

• It is not always possible for people to hold the jobs that they currently have while looking for jobs that they desire. There are various reasons behind a person who wants to quit a job.
• The person might have some personal reasons- such as marriage, house relocation, and so on. Some people like to take time off for their families. Some people save up from their previous jobs and quit their current unfulfilling ones.
• They have the financial backing to look for a new job while staying unemployed for a time.

3) Causes of Urban Unemployment

The number of people living in urban areas that do not have the right jobs is also increasing regularly. Unemployed people in rural areas are also heading towards urban areas. It has been the prime reason behind the urban unemployment.

Also, people in urban areas that are not satisfied with their job profile and earnings are part of urban employment. There are some different forms of urban unemployment are there-

1. Industrial Unemployment- It occurs when an illiterate people who are ready to work but cannot find the work in any industry or factory.
2. Educated Unemployment- It occurs when an educated person is not able to find the right job as per their qualification.
3. Technological Unemployment- It occurs when because of technology upgrades, advancements and automation existing workforce becomes unemployed.

Causes of Urban Unemployment

• Age Factor
• Physical disabilities or illness
• Vocational Unfitness
• Technological Advancements
• Disorganisation in the economic structure
• Dislocation in industries
• Mass migration of rural people to urban areas

4) Causes of Cyclical Unemployment

This type of unemployment is the most common form of unemployment in underdeveloped countries in particular. It happens when goods and services are deficient in the economy.

When this happens, it is impossible to create jobs, and most people remain unemployed.

The reason behind cyclical unemployment is a significant economic contraction in the market.

5) Causes of Structural Unemployment

There are various forms of structural unemployment for example-

• Industry shift
• Seasonal Unemployment
• Technology Obsolescence

Structural unemployment occurs when there is a mismatch in the skills required for a particular kind of work and the powers that people have to offer.

Common Causes of Unemployment

6) Global Economic Crisis

There is an economic crisis that is prevalent in the world today. This crisis has resulted from a general pattern of inefficiency in the current economy. It has negatively impacted all the positive points which lead to growth within an economy.

People are looking for jobs and unable to find them. The rich countries have failed to handle this economic crisis. People within the vibrant economies are affected by a lack of produced goods and a lack of money. Companies have begun to decrease production, resulting in a shortage of jobs.

7) Technical Advancements

Several machines and other such technologies have replaced people who were previously employed for a specific job. A lot of labourers were needed in the production and manufacture of a particular good in the past. This number has been brought down in the past few decades.

Machines are coming to substitute human effort and manual labour. Many jobs do not require intellectual ability and demand quantity work instead of quality. Machines are thus found to be more efficient than men.

8) Companies Have Fewer People On Board

Earlier companies used to have a significant workforce. This pattern has changed drastically in the past few years. Companies no longer look to hire a lot of people for different kinds of work.

Recruiters look for people who are all-rounders and can do excellent work at all times. It is preferred to have less competent workers than a larger number of irrelevant people. The same also reduces the amount of expense in terms of salaries.

9) Increased Specialization In Jobs

Companies today have begun to ask for particular skills. People cannot fulfil all the job requirements mentioned in the profile.

Recruiters offer several facilities and benefits to the working people. Thus they like to make sure that their workforce is as efficient as possible. A large number of skills are asked for, and grand demands are made of the working people. It results in fewer people getting employed.

10) Voluntary Unemployment

Many people today are unwilling to work.

 It is because people have particular demands when it comes to getting a job to which they will devote themselves. People are becoming more self-aware.

They have specific requirements from the salary and the kind of work that they have to do. When people do not find a job fitting their needs, they do not work.

What are the after-effects of an Increase in Unemployment?

When unemployment increases in the country, it causes many consequences such as-

• Negatively affects the economy of the region
• Increases the depression rates in the region
• The spending power of employed and unemployed will get reduced
• Can be the reason for the distress of the entire family of unemployed
• The crime rate in the country increases

How to fix Unemployment Issues?

Because of the destructive aftereffects of unemployment, it is important to incorporate strategies that can ensure quick and effective fixes for the unemployment issues.

Some of the top ways of resolving unemployment issues are-

• Creating more job opportunities
• Informing people to opt for different fields and new domains
• Empowering more individuals to be job creators and entrepreneurs

Wrapping it up!

Unemployment is a global phenomenon, and there are many unemployment causes.

No one particular country or community can be said to be suffering from the dark sides of unemployment.

Advanced economies are as troubled by this phenomenon as the rest of the world. Tackling this problem has become a significant issue among all economies.

What according to you, are the best solutions for the unemployment issues? Share your views with us in the comments.