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Lesson Note
Subject: Economics
Topic: Unemployment.
Learning Objectives: By the end of the lesson, the learners should be able to:
- Define unemployment;
- State and explain the types of unemployment;
- State the causes of unemployment;
- Identify the consequences of unemployment.
LESSON DISCUSSION
Concept of Unemployment
Unemployment is defined as a situation in which persons of working age, able and willing to work are unable to find paid employment. In other words, unemployment refers to a situation in which people who are capable of working and who are qualified by age to work cannot find employment.
Unemployment rate is denoted by the symbol ‘U’ and is represented by a formula below
U = Number of unemployed persons/Working population or labour force × 100/1
Example
A country has a working population or labour force of 4.8 million of which 3.6 million people are employed, calculate the unemployment rate of the country.
Solution
Labour Force = 4.8 million
Number of employed = 3.6 million
Number of unemployed = 4.8 – 3.6 = 1.2 million
So, unemployment rate,U = Number of unemployed persons / Working population or labour force × 100/1
U = 1.2 million/ 4.8 million × 100/1
U = 25%
Types of Unemployment
1. Structural unemployment: This is the type of unemployment which arises as a result of changes in the pattern of demand of certain commodity. If the demand is low, it could lead to industries reducing their work force and this eventually results in structural unemployment.
2. Seasonal unemployment: This is the type of unemployment which takes place in industries whose production is subject to seasonal variations. In other words, there are certain seasons for production. When such industries are off season, i.e not in production, very few workers are required leading to unemployment.
3. Mass unemployment: Mass unemployment is the type of unemployment which affects many occupations and industries at the same time. It is caused as a result of decrease or fall in the quantity of goods demanded. The industries so affected will embark on retrenchment of workers leading to Unemployment. Mass unemployment is also known as cycle or deficient unemployment.
4. Under employment: This is the type of unemployment which occurs when an individual works at less than his full capacity so that his productivity is below the maximum. Under-employment occurs when a worker is not working in his full capacity.
5. Frictional unemployment: This is the type of unemployment which occurs as a result of changes in the techniques of production. Due to advancement in technology, machines are introduced in production, which tend to replace labour and this can lead to retrenchment of workers. Frictional unemployment is also called technological unemployment.
6. Voluntary unemployment: Voluntary unemployment occurs when a worker deliberately refuses to take up paid employment even though employment opportunities are available, they may be receiving unemployment benefits from the government, the available jobs may not be attractive, etc.
7. Residual unemployment: This is the type of unemployment that arises as a result of physical or mental disabilities. Those who are disabled, and are not capable of working, fall into this group.
8. Casual unemployment: This is the type of unemployment which involves jobs that are not permanent. This is common with the unskilled type of labour, e.g part time jobs.
Causes of unemployment
i. Inadequate educational system: The educational systems practised by most developing countries are inadequate as special attention is paid to paper qualification to the detriment of job creation.
ii. Lack of industrial growth: Most developing countries do not have industries that are capable of employing enough workers. This leads to unemployment.
iii. Over population: When a country’s population is too high, it tends to produce many workers and such workers may not have jobs to do, there leading to unemployment.
iv. Lack of social amenities: Labour tends to be unavailable when there are no social amenities in the area.
v. Geographical mobility of labour: Due to certain circumstances, labour find it difficult to move from one geographical area to another and this results in unemployment.
vi. High cost of education: As a result of the high cost of acquiring education, many find it difficult to go to school and so end up with low paper qualification, which may not permit them to get good employment.
vii. Use of automated machines: The use of automated machines in factories reduces the need for many workers and this leads to unemployment.
viii. Deficiency in demand: An overall fall in demand for goods can lead companies to retrench workers.
ix. Poor development plans: Government does not normally put in place development plans that can create employment opportunities or take care of the unemployment.
Consequences of unemployment
i. Increase in crime rate: When there is a large number of unemployed persons, it usually leads to increase in crime rate such as armed robbery, car snatching, hired assassination, etc in a bid to survive.
ii. Threat to peace and stability: With an ever increasing number of unemployed persons, the peace and stability of the state will be threatened.
iii. Reduction in investment: The zeal to invest is always very low when there is a high level of unemployment.
iv. Migration: When there is unemployment, it usually results in an youths and adults alike moving out of the country to look for jobs in other places.
v. Waste of human resources: The time, money and energy spent in acquiring degrees and certificates will be wanted and labour is made idle.
vi. High rate of dependency: The level of dependency will increase as a result of unemployment.
Solutions to problems of unemployment
i. Industrialisation: In terms of industrialization, Government should establish many industries that can employ many workers.
ii. Population control: Population should be controlled to obtain optimum level, so as to match the human population with available natural resources.
iii. Encouraging geographical mobility of labour: The enabling environment should be created so that labour should be able to move from one geographical area to another.
iv. Provision of social amenities: The availability of social amenities does encourage workers and this tends to reduce unemployment.
v. Incentives to potential investors: Potential investors should be encouraged to set up industries that can absorb the unemployed. Incentives like tax holidays, provision of social amenities, etc will encourage investors to set up businesses that can employ workers.
vi. Proper development plans: Proper development plans should be put in place to cater for the people who are unemployed.
Factors which influence the level of wages
1. Productivity: The higher the level of production, the higher the level of wage and salaries, and vice versa.
2. Inflation: Inflation can induce employees to demand for increase in the level of wages.
3. Rising income: The rising income in key sectors of the economy (e.g the public sector) can lead to a general increase in wage limits. For example, the federal government raised the minimum salary of federal workers to #30,000 and all other employers too will have to adjust wages and salaries.
4. Demand for and supply of labour: If the aggregate demand for labour is low, there is the tendency for the level of wages to fall but if the aggregate demand for labour is high, the level of wages would rise.
5. Effectiveness of trade unions: Activities of trade unions through bargaining power can lead to increased wage level.
6. Technical changes: Technical changes such as Improved and more effective process of production will lead to increase in productivity and ultimately higher wage rates.
7. Quality of labour: The quality of labour in terms of skills or training determines the level of wages or salary attracted. Highly educated and professional workers attract higher level of wages than unskilled workers.
8. Condition of the economy: When the economy is buoyant, workers enjoy a high level of wages, but when the economy is in recession, wages and salaries level fall.
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Take a quick test for this lesson!
- Define unemployment.
- State and explain the types of unemployment.
- State the causes of unemployment.
- What are the consequences of unemployment.
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