Unemployment, ever think about what happens to people when they loose their job? Where do they go? What do they do? How do they provide for their family? These are everyday facts about unemployment, one of the largest measuring sticks for an economy. Before you can answer any of these questions. We must determine what causes or influences unemployment? Government is the cause of unemployment.
Government has a great deal of influence on unemployment. For instance, government increases minimum wage rates, which price out potential employees. Regulations that government issues affects unemployment. These regulations places high cost onto business that decrease their profits, which in return decrease their employees.
The presence of unemployment is a remarkable one. Our economy can not hide or run from unemployment. Unemployment affects everyone within an economy. One person unemployed may not seem to harm anybody, but a large number within an economy does cause a wave of concern. However not every economy is similar or affected by unemployment in the same way. Each economy has its own problems of unemployment.
These problems arise from the different types of unemployment. Some nations are severely affected by seasonal unemployment, while others are prone to structural unemployment. In addition to the two mention previously, two other category of unemployment exist and they are frictional and cyclical unemployment. The severity of unemployment that affects an economy is disguised by misrepresentation of reported unemployment rates. What is unemployment? It depends on which party you ask.
The political definition states that a person who does not have a job, but are willing and looking for one. The economist explains unemployment as a person who is not working and is looking for a job, but is only willing to work at the prevailing wage for what they do. The definitions presented above seem similar, but are apples and oranges in comparison. The political definition states that any person who is looking for a job will take anything that becomes available to them. In short they will work for minimum wage in order to stay employed.
This definition forgets that people have tendencies not to accept anything below what they are worth, regardless of skills or educational training that they have. While the economists definition includes that fact that people are only willing to work at the wage that is appropriate to what the are skilled for. For example, a steelworker will not work at McDonalds, because he is worth more than minimum wage, and will not work for anything otherwise. While our steelworker is unemployed because he does not desire to work at McDonalds he contributes to frictional unemployment. Frictional unemployment is the wasted time and resources that people spend looking for jobs.
There are jobs available but people have to search for the right jobs. Other factors that contribute to frictional unemployment are the economical composition of the economy, and cultural values. The economical composition contributes to frictional unemployment greatly in part, because a small economy that is composed of several large firms would in theory reduce frictional unemployment. Where as the same economy has 100 small firms the friction it causes by searching for the right jobs would increase. I quit is a popular statement.
It is rather rash, but very direct. The statement often leads to an increase in frictional unemployment, because people leave their jobs without attaining a replacement while in transition. It is a lack of worker etiquette. Etiquette stems from cultural values that have been instilled into a person from family, friends, and any other social network of people. A poor community that lacks values contributes to unemployment. Kids who grow up within poor neighborhoods or with parents, who do not instill proper values into them, will fuel the flames of unemployment for future generations.
For instance, inner city kids often leave their minimum wage jobs because more money can be made from hustling. The problem is that these kids do not know right from wrong or have the sense of an honest living. In addition they are working at the prevailing wage of being a hustler. They do not realize the impact that they cause by leaving jobs and becoming unemployed. Another form of unemployment that causes problems for most economies is seasonal unemployment.
These economies are structured around business that are functional for only a very short period then shut down until the next season. Businesses that are commonly found within these economies are tourism, hotel and catering, agricultural goods, and specialty shops. These types of business bring in demand for employment only for a short time frame of months. The problem arises when the busy season comes to an end and all the workers are idle again for another year. Cyclical unemployment affects all economies just at different periods.
Cyclical unemployment mimics the business cycle. When the economy is good there will be enough work to employ everybody, but when recession hits people will be laid off because demand for workers are much less. Our economy went through a terrible period of cyclical unemployment during The Great Depression. The economy was in very bad shape and people simply could not find work. After the depression passed and war happened the demand for work increased dramatically.
The problem with cyclical unemployment is that it is a great thing when the economy is booming, but when a recession hits no one knows just how long it will last. People can be unemployed for months if not years. One type of unemployment that has done some serious damage to industries is structural unemployment. Structural unemployment occurs when a whole industry becomes obsolete and not needed.
Workers who possess skills within that particular industry are stripped of all skills and talent. For instance steelworkers and the steel industry have all been revamped and changed. Before, big machines came about men would do all the physical labor work at heights that exceeding three or four stories high. Technology and better machinery have changed steelworkers lively hoods. The demand for a person is not needed because machines can do the work with less cost, and less risk of losing lives. There would not be a problem with this kind of unemployment if their skills were transferable according to wages.
Employers are not going to pay a steelworker the wage he was paid to do some work that does not require his skills. The problem of prevailing wages occurs with structural unemployment as well. Everyone feels the economic hardships of unemployment. On the surface it may seem to affect the person, who is unemployed the most, but throughout the economy there are others who also are unemployed, and with all these unemployed people it contributes to a slow down in economic growth.
Strength is in numbers, but the unemployed people produces negative strengths that bind the economy and hinders its progress. Why does it affect everyone? It is because those that do not work do not produce output for the economy. The ones that work shoulder the burden for those that do not work. Also, there is a loss in tax revenue. The government can not tax those that do not earn income.
With less tax revenue flowing into the government there are less resource that government can draw upon for new proposals and policies for improving the economy. In addition, government is taking a double stab, because unemployment causes an increase in government expenditures. They pay for those that are not employed. It leads to a disincentive to work.
The Firms and businesses take a loss in profit because of unemployment. Unemployed customers do not have a means of payment, because of the lack of income. Bibliography: