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Discuss the main causes of unemployment

      

Discuss the main causes of unemployment

  

Answers

Wilfred
1) Transitional unemployment:- Transitional unemployment is that situation which prevails due to
some temporary reasons. The main reasons for this type of unemployment are:
a) Turnover unemployment: Some individuals leave their present jobs and make efforts to
secure better ones and in this way they remain unemployed for sometime.
b) Casual unemployment: Casual workers are employed for a specific job and when the job is
completed such workers become eventually unemployed eg. shipping and building
construction workers.
c) Seasonal unemployment: some industries for instance have seasonal demand and their
products are manufactured for a specific period of time ( a specific period of the year). The
workers of such industries remain unemployed for that time eg. ice factories may remain
closed during winter.

2) Structural Unemployment: caused by structural changes such that there exist:
a) Cyclical unemployment: During depression, prices are too low and profit margins
remain distinctively low. In this case, investment decreases and unemployment increases.
b) Technological Unemployment (due to inappropriate technology): Technology is not inappropriate per se but in relation to the environment in which it is applied. In most developing countries, most of their (current) production structures tend to be labor saving (capital – Intensive), which is not appropriate since these countries experience high labor supply. Capital-labor ratios tend to be high implying that less labor is absorbed compared to capital in production ventures, thereby causing unemployment.
c) Industrial change: the establishment (entry) of new industries decreases the demand for the products of existing industries eg. the rapid increase in the demand for Japanese industrial products is one reason for greater unemployment in some European
countries.
d) Keynesian Unemployment: According to Keynesian theory of income and employment, unemployment occurs due to lack of effective demand. If effective demand is less, production of goods and services will fall, which will further result in the unemployment
of labor. Another feature of Keynesian unemployment is that unemployment of labor is associated with unemployed capital such as plant and machinery which tend to be idle during depression.
e) Urban unemployment: Due to availability of more facilities in urban areas, more and more people tend to move to these areas. The employment opportunities available are not sufficient to absorb all those people settled in the urban areas. This kind of
unemployment is therefore due to rural-urban migration.
f) Disguised unemployment: a situation where some people are employed apparently, but the total production (output) would still remain the same even if such people are withdrawn from the present jobs. In most developing countries, this type of
unemployment is estimated at 20 to 30% (especially in the public sector) and measures should be taken to employ such people in other sectors of the economy to enhance productivity.

3) Insufficient capital: Shortage of capital is a hindrance to the establishment of more industries and other productive investment and in this regard more employment opportunities are not created.

4) Nature of education system: Education systems for most developing countries are white – collar oriented yet the nature of productive capacities of their economies are not sufficiently supportive. Moreover, inadequate education and training facilities render most people unable to secure those job opportunities that require high skills and specialized training.

5) Rapidly increasing population: The population growth rate far exceeds the amount of job
opportunities that an economy can generate. Thus in summary, some of the causes of
unemployment can be said to include:
a) Rapidly increasing population
b) Inappropriate technology
c) Insufficient capital base
d) Demand deficiency/structural changes
e) Presence of expatriates
f) Education systems – white – collar orientation
g) Rural-Urban migration
h) One person for more than one job
i) Corruption and general mismanagement
j) Inadequate knowledge on market opportunities.
Wilfykil answered the question on February 6, 2019 at 11:57

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