Type of paper: Term Paper

Topic: Social Issues, Unemployment, Workplace, Economics, Labor, Employment, Production, Market

Pages: 5

Words: 1375

Published: 2020/11/13


Unemployment is a social and economic phenomenon in which part of the working population has no use to his own labor, not getting a job, the reason for this is the excess of the number of job-seekers over the number of available jobs.
Before proceeding to the consideration of the nature, causes, types and consequences of unemployment, consider what is meant by the word "unemployed" in different countries.
"Unemployed", as defined by international organizations (ILO and the Society for Economic Cooperation and Development), are people who are unemployed, who are available for work and looking for work in the last four weeks or who have already settled but had not yet started to work . For example, in the United States legally unemployed are persons who: had no employment during the week of the survey; made efforts to find work during the previous four weeks (or apply directly to the employer or to the services of the State Employment Service, or friends); who can work within a week of examination; persons temporarily laid-off, or the person hired for a new job, which should start working within 30 days. In Japan, the unemployed is a person who has not worked for a week or one hour survey in the UK - who did not have a job during the week of the survey, looking for work during the week or can not seek it because of illness or who are waiting for the results of negotiations applying for a job. Russian law on employment of the unemployed are recognized able-bodied citizens who are out of work and earnings, are registered with the Employment Service in order to find a suitable job, looking for work and ready to start.

The Essence of Unemployment and the Factors of its Occurrence

Economic efficiency of realization of scientific and technological revolution (STR) is impossible without the absolute release of the labor force. In this case, the decline in employment is not only with the technical and technological renewal of existing jobs, but also for new capital construction. Recently carried out in conditions of the STR on a new technical basis, the decline in employment and providing specific cheaper production. A significant impact on unemployment have structural changes in the economy, which is also a consequence of the impact of scientific and technological revolution, in particular, to accelerate the pace of scientific and technological progress, is a sharp impact on the situation on the commodity markets and causing a mismatch of supply and demand for labor. Most often, the market economy is linked to unemployment. Historical experience shows that in countries with a market economic system is almost always there are a number of the unemployed. It is considered that the unemployment rate from 1 to 3% is quite admissible, unemployment is 5% of the economy is able to exist, but 7% - socially dangerous levels, which should be avoided.
In a market and non-market economy, there are usually two things: people and unemployment "unemployment" jobs, that is, along with people who have no work, there are vacant jobs. But usually in a market economy the number of unemployed people is much higher than the number does not correspond to their demands of jobs, whereas in non-market economy and even in the transition economies often the opposite is true.
Overall unemployment is due to the state of the economy, so that the unemployment rate can be used as an indicator that reflects the socio-economic situation of the country. The main indicators of unemployment are its level and duration. The unemployment rate is measured as the ratio of registered unemployed to the number of people employed in manufacturing. Duration of unemployment characterizes the average outage time. World economic practice shows that full employment and a simultaneous increase in economic efficiency of social production under current conditions is difficult to achieve, most likely impossible. This is due to the fact that the main factor of economic growth and the production of objectivity - the scientific and technological revolution are both a major factor and the emergence of unemployment.

In the American economics are three main areas in explaining the causes of unemployment:

1. Unemployment as a consequence of too high wages;
2. The low demand for labor;
3. The inflexibility of the labor market due to the specifics of the goods - the workforce.
In addition, allocate such economic causes of unemployment as the accumulation of capital, which means improving the technical equipment of the means of production; changes in demand for labor, which may increase the hidden unemployment and others.

The analysis of the causes of unemployment was provided by many economic schools.

One of the earliest explanations of unemployment was given in t T. Malthus' “Essay on the Principle of Population” (end of the XVIII century). Malthus observed that unemployment causes demographic reasons, which resulted in population growth exceeds the rate of growth of production.
Marx quite thoroughly researched unemployment in "Capital" (second half of the XIX century.). He noted that with technological progress and the cost of increasing the mass of the means of production per one employee. This fact convinced Marx that economic development leads to the lag of labor demand on the rate of capital accumulation, and this is the cause of unemployment. Such an interpretation is mathematically not quite correct, because if the demand for labor increases, the unemployment disappears or at least resolve, despite the fact that capital accumulation occurs even faster.
The merit of Keynes in the development of the theory of unemployment is largely determined by the fact that he presented a logical model of the mechanism unwinds economic instability and its integral component - unemployment. Keynes observed that the growth of national wealth in the developed market economy most people are not all income is consumed and its part turns into savings. That they turned into investments, you need to have a certain level of so-called effective demand, consumption and investment. Falling consumer demand reduces the interest to invest capital, and as a consequence, reduced demand for investment. In the fall of incentives to invest production is not growing, and even can not clot, which leads to unemployment.
An interesting interpretation of the unemployment prominent British economist AC Pigou, who, in his famous book "The Theory of Unemployment" (1923) substantiated the idea that the labor market operates imperfect competition. It leads to an overestimation of the price of labor. Therefore, many economists that the famous British economist M. Blaug called orthodox for their belief in the infinite possibilities of the market, pointed out that the entrepreneur is more profitable to pay high wages to qualified specialists able to increase the cost of production. Due to its high labor entrepreneur has the ability to reduce operating personnel (the principle: it is better to take one person to work and good pay him than to keep 5-6 people with lower wages). In his book, Pigou detail and fully substantiated the view that a general reduction in money wages can stimulate employment. But this theory can not yet fully explain the sources of unemployment. And the statistics do not confirm the position that the army of the unemployed is always replenished by workers with relatively low wages.

Types of Unemployment and Methods of Dealing with its Consequences

Unemployment may take the following forms:
1) The fluid or frictional unemployment - reflects the turnover rate associated with a change of employment, place of residence, during the introduction of new technological advancements such a movement of labor to new jobs is not only inevitable, but also more intense. Means of reducing frictional unemployment is the expansion of information services: to provide timely information on availability; the creation of special organs of the press and television to accelerate opportunities for varying information.
2) Structural unemployment - it is essentially a deepening of frictional unemployment, when the country is undergoing global structural changes, changing the relationship between the sectors, of course, is enhanced labor turnover, for creating new proportions in the intersectoral allocation of jobs. It is unemployment, which is the result of mismatch of supply and demand for qualifications and expertise due to the skill and educational backwardness of the labor force. Structural unemployment is a severe form of unemployment, as the cost of its removal, i.e. costs of new training for people, the establishment of institutions to improve or change qualifications, as well as the change of the education is very high.
3) Institutional unemployment (which occurs when the organization itself of the labor market is not effective). Suppose incomplete information about job vacancies. The unemployment rate would be lower when adjusted the system information. In the same direction are exaggerated unemployment benefits or understated income taxes. In this case, increases the duration of unemployment since blanked incentives for active job search.
4) Cyclical unemployment, causing a decline in production during the industrial crisis and depression. With the transition to a revival of production and the rise of unemployed usually becomes less.
5) Voluntary unemployment (in any society there stratum of people who in their psychological makeup, or for other reasons do not want to work).
6) Hidden unemployment or underemployment: that when people work part-time or are on forced leave, etc. This type of unemployment is subject to such owners of small businesses who are paid below the average wage. They are ready at any time to leave your company. Hidden unemployment is typical for rural areas: half-bankrupt peasants formally considered independent owners, but in reality they are unemployed - they are unnecessary in this kind of production
7) Long-term unemployment includes primarily working in factories, and in their own homes. The employees of home system fully occupied only during certain seasons, and all the rest of the unemployed. The lowest layer of stagnant form of overpopulation people thrown out of production and forever deprived of the possibility to return to it.

Positive Effects of Unemployment

Effects of unemployment can be positive (only at a moderate unemployment!) And negative. Consider unemployment in a positive way. First, from an economic point of view, unemployment is a reserve of unemployed labor force, which is always possible to use. For example, when restructuring or seasonal fluctuations in demand for labor. If we imagine a situation in which there is absolutely full employment, then there are problems of labor jobs. Investment process begins to slow down, which may even have a negative impact on the overall efficiency of the economy. Secondly, from a psychological point of view, moderate unemployment increases labor discipline. It operates a stimulus, as the risk of losing their jobs. This makes the employee not only on time and in proper form to come to their workplace, but also voluntary work, giving high quality products. Third, from a demographic point of view, moderate unemployment can contribute to optimizing the structure of employment by sex and age. If, for example, in a particular period in the structure of employment is dominated by female labor, it can affect not only the education of the younger generation, but at the very birth rate. In this case, moderate unemployment, absorbing, especially women, can make adjustments to the structure of employment and thus contribute to the solution of demographic problems of the country. Fourth, from a political point of view, moderate unemployment promotes entrepreneurship, cooling the ardor of employees and trade unions, which put forward exorbitant demands to improve working conditions. In general, as a rule, this will stabilize the political situation and contributes to a certain extent in this process.

Negative Effects of Unemployment

Firstly, unemployment reduces the economic potential of the company due to its underutilization. This leads to the following losses: to reduce the volume (in comparison with the possible) of GNP; drop in consumer demand; reduction savings; inhibition of the investment process: supply reduction; decline in production. Unemployment also leads to loss of qualification freed workers and, consequently, to a steady decline in their productivity. Studies have shown that even after two - three-month break out to the former employee productivity in about 6-7 months. Secondly, from a social point of view, unemployment promotes criminalization of society. Thirdly, unemployment is associated worsening mental health of the nation. Doctors say that the negative reaction obtained in the notice of dismissal, in its effects on the human psyche is equivalent reaction to the message of the death of closest relatives, and more reports of prison. Fourth, unemployment may exacerbate political instability of society, contributing to the emergence of social cataclysms.
Methods against unemployment are defined by the concept that guides the government a particular country. Modern Malthusians offer to maintain stability in the labor market through public policies of birth control. Pigou and his followers believe that the root of evil is a high wage offer:

· Contribute to the reduction of wages;

· Explain the unions that wage growth, which they seek, turns rising unemployment;
· State employs workers applying for low income, in particular, to encourage the development of the social sphere. Of the recommendations Pigou is widely used division wages and working time among several employees. Using the partial working day reduces unemployment even with the unfavorable market conditions.
Keynes recommended as a condition of survival for the unemployed, public works. Monetarists offer in an environment where unemployment and a decline in production take place against the background of inflation, to remove all the burden on the state budget, immediately reduce the state budget deficit. In these circumstances, the state is forced to evade social programs, which, of course, leads to the delivery of social tension.


Unemployment is a position in the economy, in which the working population is relatively redundant. This is expressed by the mismatch between labor demand and supply. Unemployment is frictional, structural, institutional, cyclic and voluntary. Unemployment is a consequence of scientific and technological progress, increased efficiency of production, changes in the sectoral structure of the economy, reduction of production, resulting in a workforce released or placed new demands on its quality and structure. Unemployment increased sharply during the crisis. The problem of unemployment is a key issue in the market economy, and without solving it impossible to establish an effective activity of the economy. Over the past few years, unemployment has become a major form of macroeconomic phenomenon, becoming an independent factor of economic development.
As with any economic phenomenon, unemployment cannot be considered one-sided. It can be evil (reduction of the economic potential of society, loss of qualification of personnel freed, the deterioration of the psychological health of the nation, increasing political instability in society) and good (reserve of unemployed labor force, increasing labor discipline, optimizing the structure of employment by sex and age, promotes entrepreneurship) - it all depends on the measure of this phenomenon and the particular circumstances. Moderate unemployment (within 3-5% of the total number of able-bodied population) is good. But as soon as it begins to move beyond this level, i.e. 5% limit, are beginning to emerge more clearly negative aspects of unemployment, which were previously only potential. It can be concluded that the unemployment problem cannot be solved in one step, and are in the nature of multilateral programs, which must be realized in order to prevent and decrease unemployment.

Works Cited

Farmer, Roger E. A. (1999). "Unemployment". Macroeconomics (Second ed.). Cincinnati: South-Western. pp. 173–192. ISBN 0-324-12058-3.
Summers, Lawrence H. (2008). "Unemployment". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.
Romer, David (2011). "Unemployment". Advanced Macroeconomics (Fourth ed.). New York: McGraw-Hill. pp. 456–512. ISBN 978-0-07-351137-5.
Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, NJ: Pearson Prentice Hall. p. 335. ISBN 0-13-063085-3.
Simonazzi, A.; Vianello, F. (2001). "Financial Liberalization, the European Single Currency and the Problem of Unemployment". In Franzini, R.; Pizzuti, R. F. Globalization, Institutions and Social Cohesion. Heidelberg: Springer. ISBN 3-540-67741-0.

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