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Causes of Unemployment

Causes of Unemployment

Unemployment stems from plenty of factors. It might be the economic condition of a country or an individual's decision to remain unemployed. We have explained you the most common causes of unemployment over here.
OpinionFront Staff
Last Updated: Apr 9, 2018
A man willing to work, and unable to find work, is perhaps the saddest sight that fortune's inequality exhibits under this sun ~Thomas Carlyle
The definition of unemployment as explained in the dictionary of economics is 'the state of an individual looking for a paying job but not having one'. Unemployment occurs when people face crisis in job opportunities due to the unpredictable nature of the economy. It's not a problem that has recently hit the economy, rather it was largely evident during the 16th century. Despite coming from a good educational background and being eligible for jobs, people still remain unemployed. Why does this happen? Let's find out.
Causes of Unemployment: An Overview
The exact cause of unemployment will always be disputed because there are numerous predictions, theories and explanations put forth by economists. Here we shall consider the Keynesian theory (of macroeconomics) explained by the renowned British economist John Maynard Keynes. This theory states that, unemployment results from an increase in demand rates, while the economy operates below its growth rate and potential output. Henceforth, the economy faces a great blow under this circumstance.
Economic Recession
Recession became one of the prime causes of unemployment in the United States in the year 2007. It became a global crisis wherein the rate of unemployment knew no bounds. A severe financial crisis hit almost all countries throughout the world. Rise in unemployment and sine die of established companies became a regular affair. People remained unemployed till the economies regained stability.
Welfare Payments
Welfare payments although are security measures for people, cause unemployment to some extent. The aids given by government to the unemployed people actually reduce their willingness to work. This is an indirect negative impact of extended unemployment benefits because people become more dependent on the grants they receive. They register for government grants even if they are not looking for jobs, and the incentives they get are enough to fulfill their daily requirements. This way people remain deliberately unemployed.
Changing Technology
Since technology keeps advancing with passing days, most companies look for a change in workforce. Although, they do not fire people randomly, they hire people having specialization in the advanced techniques. A kind of imbalance is caused when they stop involving their own employees in major areas of production and development. This gives rise to frustration in work and many tend to resign. Thus old employees get substituted by the new and the former remains unemployed either temporary or permanently. In short we can say that, job cuts due to changing technology elevates rate of seasonal unemployment.
Economic Inflation
Inflation is one of the oldest causes of unemployment. A state's economy faces a steep rise in prices as compared to other economies of the world. This leads to failure in exports, as companies are not able to compete with others due to rise in price. Incomes suffer, people's savings fall and gradually companies start firing people, being unable to pay them on due time. Thus, the rate of unemployment increases.
Job Dissatisfaction
Job satisfaction is quintessential for self progress and gaining stability in work. There are many people who take up jobs on temporary basis. The reasons being family pressure, financial crisis and for experience. However, a person who is not contented with his job can never continue it in the long run, because he is either making a compromise with his pay scale or his job profile. Thus, job dissatisfaction becomes one of the primary cause behind unemployment.
Employee Values
Often employees are not given the due recognition for their good performance and dedication. This creates an unfavorable work environment, which further demotivates employees. When values of employees are neglected by the organization, they lose interest in their work. It becomes an indirect way of compelling employees to leave their jobs. People remain unemployed until they find a good job.
Racial Discrimination
Racial discrimination still prevails in many organizations. It's one of the most serious causes of unemployment. People who are not citizens of that particular country remain unemployed due to discrimination on grounds of race, religion, caste and ethnicity. It becomes very difficult to find out a decent job under such circumstances. Thus, earning money for survival becomes difficult and ultimately they are forced to leave the country.
These were the most probable reasons behind unemployment. It's important to note that an individual's approach towards finding a job or to remain unemployed matters a lot. People who are unemployed for genuine reasons can register for the unemployment insurances planned by the government and reap the benefits till they find a job.