Write a short note on unemployment?
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Unemployment or Joblessness is when a person who is of normal working age 15 to 18 and 58 to 65 does not have a paid job. They therefore do not get paid a salary. In some parts of the world, there are social networks to care for the unemployed.
The unemployment rate is the number of unemployed people divided by the total population of that age group of a country. The unemployment rate is influenced by many things, including the government of a country to the average age of a country's population. Unemployment is a bad thing for society.
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KEY TAKEAWAYS
Unemployment occurs when workers who want to work are unable to find jobs, which means lower economic output, while still requiring subsistence.
High rates of unemployment are a signal of economic distress, but extremely low rates of unemployment may signal an overheated economy.
Unemployment can be classified as frictional, cyclical, structural, or institutional.
Unemployment data are collected and published by government agencies in a variety of ways.
Understanding Unemployment
Unemployment is a key economic indicator because it signals the (in)ability of workers to readily obtain gainful work to contribute to the productive output of the economy. More unemployed workers mean less total economic production will take place than might have otherwise. And unlike idle capital, unemployed workers will still need to maintain at least subsistence consumption during their period of unemployment. This means the economy with high unemployment has lower output without a proportional decline in the need for basic consumption. High, persistent unemployment can signal serious distress in an economy and even lead to social and political upheaval.
On the other hand, a low unemployment rate means that the economy is more likely to be producing near its full capacity, maximizing output, and driving wage growth and rising living standards over time. However, extremely low unemployment can also be a cautionary sign of an overheating economy, inflationary pressures, and tight conditions for businesses in need of additional workers.
While the definition of unemployment is clear, economists divide unemployment into many different categories. The two broadest categories of unemployment are voluntary and involuntary unemployment. When unemployment is voluntary, it means that a person has left his job willingly in search of other employment. When it is involuntary, it means that a person has been fired or laid off and must now look for another job. Digging deeper, unemployment — both voluntary and involuntary — can be broken down into four types.
Frictional Unemployment
Frictional unemployment arises when a person is in between jobs. After a person leaves a company, it naturally takes time to find another job, making this type of unemployment short-lived. It is also the least problematic from an economic standpoint. Frictional unemployment is a natural result of the fact that market processes take time and information can be costly. Searching for a new job, recruiting new workers, and matching the right workers to the right jobs all take time and effort to do, resulting in frictional unemployment.
Cyclical Unemployment
Cyclical unemployment is the variation in the number of unemployed workers over the course of economic upturns and downturns, such as changes to oil prices. Unemployment rises during recessionary periods and declines during periods of economic growth. Preventing and alleviating cyclical unemployment during recessions is a major concern behind the study of economics and the purpose of the various policy tools that governments employ on the downside of business cycles to stimulate the economy.
Structural Unemployment
Structural unemployment comes about through technological change in the structure of the economy in which labor markets operate. Technological change such as automation of manufacturing or the replacement of horse-drawn transport by automobiles, lead to unemployment among workers displaced from jobs that are no longer needed. Retraining these workers can be difficult, costly, and time consuming, and displaced workers often end up either unemployed for extended periods or leaving the labor force entirely.
Institutional Unemployment
Institutional unemployment is unemployment that results from long term or permanent institutional factors and incentives in the economy. Government polices such as high minimum wage floors, generous social benefits programs, and restricive occupational licensing laws; labor market phenomena such as efficiency wages and discriminatory hiring; and labor market institutions such as high rates of unionization can all contribute to institutional unemployment.
Measuring Unemployment
In the United States, the government uses surveys, census counts, and the number of unemployment insurance claims to track unemployment.