What is unemployment?
Unemployment is defined as the part of the population which is capable of actively engaging in economic activity but is unable to find suitable employment or has lost previous employment. The result can be severe financial hardship, social withdrawal, and even poverty.
Causes of Unemployment
Unemployment is an ongoing problem in many countries around the world. One of the primary causes of unemployment is a lack of available jobs. When businesses can't find workers to fill positions, they don't expand their operations, leading to a reduction in overall job availability. Financial downturns and recessions can cause companies to lay off employees which adds to the pool of people who are out of work.
Another factor that contributes to unemployment is when people take longer than expected to get qualified for certain jobs and lack the necessary skills employers desire, making them unable to fill positions or even be considered for open roles. In some cases, automation has also reduced the need for humans in certain fields.
How does unemployment affect the overall growth of an economy?
Unemployment can have a measurable and substantial impact on the overall growth of an economy. When jobs are not plentiful, consumers often spend less, creating a cycle that restrains economic growth. Furthermore, with fewer job opportunities available, those who would normally join the workforce are left unable to contribute their skills and energy. This can lead to fewer tax revenues, further hindering the economic development of a society.
Additionally, high unemployment rates often come with decreased confidence in an economy. The decrease in confidence can lead to a decrease in investment which only further cements the stagnancy of economic growth. Consequently, decision-makers must take steps toward improving employment rates as part of any economic development plan.