Causes of Unemployment

Causes of Unemployment

An unemployed person is the one who is not working anywhere for a reasonable time and is still searching for the appropriate job. The people who leave a job or are not working according to their wish are not termed as unemployed. The unemployment does not only leads to the scarcity of money, a person when is unemployed his skills and capabilities go wasted which could have otherwise utilised to contribute to nation's growth. Further, the unemployment leads to martial tensions, depression and set of other problems. In judging nation's prosperity and development, the percentage of the unemployment plays a major role. It is also said that when a nation has a suitable economy, there is less number of people who are unemployed.

There are various ways through which the unemployment ratio is measured as the increasing number of unemployed people is a setback for any economy. In the economy of the nation, the citizens of that nation play a very crucial role. The more unemployed people in an economy interpret the problem in the policies. There are numerous reasons which cause the unemployment. The reasons for the unemployment:

The cause of unemployment has categorised into three important categories:

Frictional Unemployment-It is the situation of unemployment which occurs when a worker changes his job due to various reasons. The reasons may be; the search for a better job regarding salary or work, it could be the job change due to the family situation. Because of the nature of frictional unemployment; this kind of unemployment always exists in the economy. No need to mention that the workers are always in quest of better wages job. So at any time point there will the people who are unemployed because of a job change.

Structural Unemployment- The technology is constantly advancing so many a times there appears a situation in a company that where the requirement of the job is to have the technically skilled workers. As a result, the workers who lack the skills becomes unemployed. The companies which adopt these advance technologies cannot be blamed upon as to stay in a competitive market they have to use the advance features. However, the consequence of adopting these technologies falls on the workers who lack these skills.

Cyclical unemployment- The companies hire workers to make goods or to provide services. The demand controls the supply of the products. More is the demand; more will be the supply. As a result, the companies would require more workers to fulfil the demand. The companies will make a good profit by selling their products and will be callable enough to pay the workers. When there is a contraction in the business, more people are forced to leave their job owing to plant closures or business failures. This leads to the decrease in demand of goods as the people don't have the spending capability.When demand is low, the supply would be affected. So as result companies don't make a profit and are unable to pay their workers, consequently they are forced to leave their job and becomes unemployed.

The other numerous reasons which causes unemployment; the less creation of new jobs both in Government and the private sector in comparison with the number of workers, the growth of the economy as the higher growth of the economy will lead to more business setups which will, in turn, create more job opportunities. The tax norms of the Government also play a very major role in unemployment. When a Government taxes are on higher side, the companies are reluctant to start the new business; the fewer setup of new business will lead to the creation of less number of jobs for workers.

This forms the cycle of unemployment that is why it is termed as the cyclic unemployment. The cyclic unemployment is a major concern for the Governments as it infers to the conclusion that the companies are not making a profit. The impact of which will lead to more unemployment in near times.

For any Government, the removing of the unemployment is the major task. For this reason, the Government keeps the review of the unemployment rate on a regular basis. When they find that the rate of cyclic unemployment is too high, they try to create the jobs in the market. For the creation of the job, they bring changes in the policies mainly Monetary Policy and Fiscal Policy.


The causes of unemployment have a nature that they are bound to exist. The Government will do their best to decrease the unemployment but for a worker, it is very necessary to upgrade his skills and increase the areas of expertise. It will lead him to become a trained worker in various fields so that if he is unemployed from one company or area he finds the job easily in another. To conclude in a philosophical manner, it can be said that the unemployment lies within us. We have first to take steps to curb it at our end.

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