Unemployment: Meaning, Causes, Effects, and Solutions
Definition and Meaning: A person can be referred to as unemployed when he or she is willing and able to work but is currently jobless. Such people are usually actively seeking job opportunities.
In simpler terms, unemployment is the state of not having a job. A country is said to have a high rate of unemployment when many of its citizens do not have jobs. When a lot of people are without work in a nation, levels of poverty are also high due to lack of income sources.
Underemployment, on the other hand, is the situation in which people in a workforce are employed at less than full time. It can also be taken to mean a condition in which individuals are working at jobs that are inadequate when matched against their economic needs or training.
Underpayment is when people are not properly compensated in accordance with the risk or amount of work done. It is an approach taken by some employers to increase profit margins at the expense of employee welfare.
It is important for the state to intervene and reduce cases of unemployment because of its cyclical nature. It can result in many social problems in a country and stall economic growth.
Causes
There are many reasons for unemployment, underemployment, and underpayment in an economy. These are some of the more common causes:
- Lack of skilled and technical training: The current business environment is such that there is high demand for skilled and techno-savvy employees. This has been necessitated by the incorporation of technology in many business processes. Technologies have been introduced in almost every sphere of the job environment. There is, therefore, a growing demand for skilled and specialized workers. Lack of skilled and technical training will thus make it difficult for an individual to find gainful employment.
- Lack of education: A majority of those without employment in many economies are those who lack education. Going to school equips one with relevant skills and training required in the job place. There are several causes of lack of education. In many cases, people from poor backgrounds lack money to finance their education and therefore drop out of school. Areas with widespread poverty have high unemployment rates because of this. Cultural practices like early marriages also cause girls to drop out of school and start families. It explains why regions where this practice is prevalent, have so many women without jobs or reasonable sources of income.
- Underpayment: It can be very frustrating when one works without being adequately compensated for the job done. Underpayment occurs when qualities are not recognized. The employer’s primary focus is to increase profit margins at the expense of workers. Workers sometimes have to work very long hours to make ends meet. A person can also be underpaid when he or she is working at a job that does not match the level of education that one has attained. For example, a university graduate working as a waiter at a fast food restaurant. The amount of money spent to acquire the degree dictates that the person is also compensated reasonably. Underpayment leads many people to quit employment due to frustration.
- Employment of children at lower wages: This is another unethical business practice geared towards increasing profits. It occurs mainly in countries or regions with weak labor laws and institutions. Such children are employed as unskilled workers and therefore paid as such. Because of the young age, they are easily manipulated and taken advantage of. A lot of them do not also have responsibilities to take care of and therefore the small amount of money paid seems sufficient to them.
- Large population: When an economy has more workers than the labor market demands, the level of unemployment will be high. It means that even skilled workers who are willing and able to work will be without jobs because of unavailability of employment vacancies.
- Lack of job opportunities: Countries where a high number of young people have studied up to the university level but with limited job vacancies have serious unemployment problems. There is a lot of competition for the few slots available.
Effects
What happens when the rate of unemployment in a country is high? There are many problems that arise as a result of unemployment, underemployment, and underpayment.
- Economic stress: Unemployment, underemployment, and underpayment cause economic stress because one is unable to meet financial obligations. An individual is condemned to a life of poverty with poor living standards. Resources are stretched thin, and even the little financial needs become difficult to meet.
- Mental stress: Financial success is a key ingredient for peace of mind.When one is always worried about where the next meal will come from or where to get the cash to pay for basic needs such as clothing and education, stress sets in. Depression can also occur when the self-esteem of a person is damaged. An individual who has gone through school, earned a degree and spent a lot of money in the process can become so frustrated with life when he or she is unable to get employment. Depression can lead one to drugs and alcohol abuse as a coping mechanism.
- Decreased demand for consumables: Consumerism is fueled by the purchasing power of the middle class. It leads into increased sales in the retail sector and fuels its growth and that of the country’s economy. When people have jobs and are well paid, their purchasing power also improves. Lack of jobs, underpayment and underemployment cause a decrease in the purchasing power of citizens.
- Societal unrest: Many people, especially youths, engage in criminal activities when they don’t have jobs. Idleness forces them to find something to occupy themselves with. As mentioned before, areas with high rates of unemployment have very high crime rates. Economic stress also causes societal unrest as citizens become frustrated with their situations and try to find ways to attain better lives. This can be perpetrated through civil unrest to get the elected leaders to act and remedy the situation.
- Unable to repay loans and due expenses: Defaulting on loan repayments was one of the reasons why the U.S economy went into recession in 2007. The banking sector suffered losses and this affected several sectors of the economy. Defaulting on repayment can also cause people to lose their property through foreclosure and repossession. It can set an individual back financially and trigger a chain of severe effects such as bankruptcy and loss of business.
Solutions
These are some of the ways in which the issues of unemployment, underemployment, and underpayment can be tackled:
- Education: They say education is the key to success. It opens the door to many possibilities and equips one with both life and work skills. The lack of education condemns one to a life of poverty. There are people who would like to stay in school and attain the highest level of education that they possibly can but are limited by lack of money. Education should, therefore, be made accessible to everyone. One way of achieving this goal is by making basic education free for all. The government should also make it easier for students to access loans to pay for their education. In this way, more people will be able to go to school and learn important skills. Changing the syllabus to meet the challenges of the contemporary job environment is also a good approach. This should be done to keep up with the pace of technological changes.
- Skilled Based Training, Vocational Training, Technical training : Skills and techniques should be taught through skilled-based training, vocational training, and technical training. This would greatly benefit those who are unable to afford university education or did not obtain sufficient grades to get into one. It would help tackle the problem of unemployment among the youth in rural areas who tend to end their pursuit of education after completing high school. Equipping them with such skills make them employable in a labor market that is very dependent on technical skills and training. Such training would also put them in a position where they qualify for better pay. Employers tend to pay skilled workers better than unskilled laborers.
- Creation of diversified job opportunities: Economic policies go a long way in determining the rate of unemployment in a country. This can be drawn from the example of the 2007 global recession when many firms closed shop or downsized the number of employees to stay in business. Good economic policies will lead to the creation of jobs and reduce the level of unemployment in a country. Generation of better employment opportunities at all levels such as skilled, unskilled and professionals can also minimise the rate of unemployment. Encouraging the culture of entrepreneurship among the youth would also play a vital role in growing the economy and cutting down the number of unemployed young people.
- Explore the hidden qualities: Creating awareness to help people find their hidden qualities can also be a way to address the problem of unemployment. This would encourage self-employment and reduce overdependence on the formal job sector. A naturally gifted artist can make art and sell it. A talented soccer player can improve his or her skills and become a professional player. A poet or creative writer can also use such talents to earn money. One of the reasons why many people who have gone to school rely too much on the formal job sector for employment is that the school system conditions them that way. It is lost on many of them that talents can also be used to earn a good income and lead a comfortable life. Creating awareness about this issue can go a long way in making people proactive and cultivating a culture of self-employment among them. Many of the richest people in the world depend on their natural qualities to make money.
- Improved communication for available job opportunities: Looking for a job is not an easy task. For many people, the biggest challenge is usually in identifying the available job opportunities. Where does one start from? Who do you talk to? What is the best way to make the application? There should be improved communication for the available employment vacancies to guide those interested in where to look. Sometimes companies do not find the right person for the available opportunity because the position was not properly advertised. Better communication will see a high number of people go for the available vacancies.
- Geographical mobility beyond national borders: The one factor that has driven globalization is the advancement in technology. It has provided easier access to information and increased avenues of communication. Thanks to social media, people are now more culturally aware than before. A person living in, say India, has an idea of the culture of Australians because of platforms like Facebook and Twitter. The generated interest means that more people are now comfortable with going to foreign countries to pursue employment opportunities. The biggest hindrance to this desire is stringent immigration policies. Easy migration to foreign countries will encourage people to seek employment opportunities outside their borders.
Conclusion
Having a good life is not the preserve of a few people. Everyone should aspire to live well and make the most out of life. However, nearly all of these desires are dependent on having a stable source of income. The main reasons why many people go to school are to gain knowledge and learn important skills that will make them relevant in the job market. The restructured corporate environment is very dependent on skills and technical know-how. It, therefore, means that those without proper training will be left without employment because the are deemed unfit for the labor market. Education is one of the key ways of reducing the level of unemployment. It should thus be the prerogative of every government to ensure that every citizen gets a good education. Apart from this, individuals must also become creative and find alternative ways to earn income without relying on formal employment. This can be done through the utilization of natural talents and entrepreneurship. All these would go a long way in addressing the issues of unemployment, underemployment, and underpayment.
