Causes of Unemployment and Poverty

Causes of Unemployment and Poverty

Introduction

Two severe challenges that the world are facing nowadays are poverty and unemployment. These problems could have negative impact on personal life, such as reduction in self-esteem, enthusiasm in maintaining interpersonal relationship and family life. In addition, the national economy and the development of other aspects would be affected by these problems. To solve these problems, the first step should be analyzing their causes.

Unemployment

The jobless was defined as people who have ability to work but do not have work, and have made every effort to find a job in the past four weeks but failed. Apart from this, unemployment statistics also includes people who were provisionally dismissed and were waiting to return to work, and those who were waiting for a new job, and could have a position in 30 days (Amadeo, 2018). There are three main types of unemployment: frictional unemployment, structural unemployment and cyclical unemployment (Amadeo, 2017). Thus, it is necessary to discuss causes of unemployment based on different types of it.

One characteristic of frictional unemployment is voluntary. The main reason why it occurs is that personal willingness has huge difference with social willingness. Then, employees may resign and attempt to find a job that fit their skills and expectation. This process requires time, and leads to the temporary unemployment. Furthermore, family factors could cause frictional unemployment, such as immigration, divorce, raising children or taking care of the elderly. After they solve these family problems, they may re-enter the workforce and keep seeking jobs for a short-term period (Amadeo, 2017).

The causes of structural unemployment could be changes in economic structure, including industrial structure, product mix and regional structure. The supply of workforce could not match social demand. For example, in China, although the overall workforce is surplus, shortage of professional and technical personnel in the first, second and third industries would aggravate, according to Report on Employment of University Graduates in 2017. However, the workforce in other industries, such as service industry and sales industry, is beyond social requirements.

Cyclical unemployment could be caused by inadequate social demand. During the period of economic recession, consumer demand is low, and this lead to low interests or losses in many companies. In this way, these firms have to lay off employees. Lower consumer demand is also the result of higher unemployment, since the jobless do not have income to support products that they want to buy, which is why this type of unemployment is cyclical (Amadeo, 2017).The Great Recession of 2007 is a typical example. Since the start of it, the worldwide number of the jobless exceeded 30 million (Loungani, 2010)

Poverty

The issue of poverty has been brought into public focus around the world. However, when it comes to give an exact definition of poverty, most experts believe that poverty is a complicated and multidimensional issue.

There are two forms of poverty: absolute poverty and relative poverty.

According to Goulden and D’Arcy (2014), absolute poverty happens when individuals’ resources can not afford their basic needs, including shelter and food that can maintain their life. There are five main causes of it: warfare, natural disasters, centralization of power and corruption, discrimination and social inequality as well as environmental degradation (Vale, 2017). For example, during the Second War, countries’ productivity decreased, and this led to massive job loss, unstable resource of living necessities. They were even lose their house and families. When Haiti earthquake occurred in 2010, there were 2 million homeless who have lost all of their property.

Relative poverty is a situation that individuals’ income can not achieve nation’s average level. This involves a comparison with other members of the society and the inequality among different stratum. Therefore, people’s value judgment should be a key factor when it comes to judge whether a person is poor or not.

Relationship between economic structure, poverty and unemployment.

It is undeniable that most problems of poverty and unemployment are related to economic structure. If countries’ economic structure is applicable and reasonable, the provision of jobs will be more balanced, thus increasing the employment rate.  As the employment rate increases, the poverty problem will be solved to some extent as a part of the poor come from the unemployed. For example, when the core of countries’ economic structure shifts from agriculture industry to technological development, those who used to work for agriculture, such as farmers, will face the problem of unemployment. After they lost their jobs, their sources of income disappear and lead to poverty. However, not all unemployment and poverty issues are related to economic structure. For instance, voluntary unemployment has nothing to do with the economic structure. People may choose to be unemployed because of personal preference, family factors and working environment. Similarly, poverty caused by natural disasters, environmental conditions, warfare and discrimination are not related to economic structure. Therefore, it is could be concluded that the economic structure can only explain why unemployment and poverty happen to a certain extent.