Reading Time: 3 minutesUnemployment or joblessness occurs when people are without work and actively seeking work. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force. According to International Labour Organization report, more than 6% people globally are out of work of the world’s workforce.
Classical economics and New classical economics argue that market mechanisms are reliable means of resolving unemployment or joblessness. These theories argue against interventions imposed on the labour market from the outside, such as unionisation, bureaucratic work rules, minimum wage laws, taxes, and other regulations that they claim discourage the hiring of workers.
The main types of unemployment or joblessness include structural unemployment which focuses on structural problems in the economy and inefficiencies inherent in labour markets, including a mismatch between the supply and demand of labourers with necessary skill sets. Structural arguments emphasize causes and solutions related to disruptive technologies and globalization.
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Types of and theories of unemployment or joblessness, including cyclical or Keynesian unemployment, frictional unemployment, structural unemployment and classical unemployment.
High and persistent unemployment, in which economic inequality increases, has a negative effect on subsequent long-run economic growth. Unemployment or joblessness can harm growth not only because it is a waste of resources, but also because it generates redistributive pressures and subsequent distortions, drives people to poverty, constrains liquidity limiting labour mobility, and erodes self-esteem promoting social dislocation, unrest, and conflict.
Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction. Unemployment or joblessness increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression.
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There is a trade-off between economic efficiency and unemployment or joblessness: if the frictionally unemployed accepted the first job they were offered, they would be likely to be operating at below their skill level, reducing the economy’s efficiency.
Social welfare programs benefits include unemployment insurance, unemployment compensation, welfare and subsidies to aid in retraining. The main goal of these programs is to alleviate short-term hardships and, more importantly, to allow workers more time to search for a job.
High unemployment or joblessness can also cause social problems such as crime; if people have less disposable income than before, it is very likely that crime levels within the economy will increase.