World of Economics

In the world of economics, unemployment is a term used to refer to the state, extent and condition of joblessness that exists of may exist within an economy or a nation. Unemployment is measured in the modern society terms unemployment rate; which refers to the total number of the unemployed workers in a particular area divided by the total number of labor force in that area. It is therefore the condition of an individual not having a job. The term unemployment are also sometimes used in reference to any other inputs that aide to the production yet are not fully utilized, such as, unemployed capital or goods. Unemployment has a considerably rich history that matches with that of industrialization. As industrialization spread, the problem of unemployment seemed to have been sorted. However, with the increased in the population, many people could not fit in the jobs that were available in the industries at that time (Sinha, 2014).

The basic rationale that causes unemployment is when someone is laid off by his or her employer, when fired or when the individual quits the job at their own good will. This causes temporal situation where the individual lacks a job over sometime. This type unemployment is termed as natural unemployment and has been established to always occur even in healthy economies. Retirement is however not classified as unemployment as the retiring individual does so as a matter of the expiry of their age of productivity. The definition and cluster of individual as unemployed also significantly varies from one nation to another. In some nations like in the United States, the unemployed individual gives up looking for a job then they are not classified as unemployed by the Federal government.

Other causes of unemployment include:-

1) Technological advances

Sometimes unemployment is a result of advanced technology, such as computers or robots, which replaces worker tasks with machines. If the workers are not retrained, they may not have the skills needed to get a new job. This is known as structural unemployment. If labour markets are flexible, then technological change will not cause unemployment. However, if there are labour market inflexibilities, then it can cause unemployment - at least, for a certain time period. For example, due to technological change, coal miners may lose their jobs. However, due to occupational and geographical immobilities, they may be unable to take new jobs in the service sector. (e.g. a miner may not have skills to work in computers; he may find it hard to relocate). In this case, technological change can cause a temporary increase in unemployment - which will last until the coal miners develop greater skills and ability to move (Amadeo, 2014).

2) Outsourcing workers

Unemployment can also be caused by job outsourcing. This is when a company moves its major sector that employs people such as manufacturing or call centers to another country where labor costs are cheaper. This leads to a large number of the former host nation losing their jobs at a faster rate than expected. Outsourcing may also occur at a much lower rate such as when the company opts to lay off inexperienced workers at in a bid to get the more experienced international workers (Amadeo, 2014).

3) Structural Unemployment

Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers. This occurs due to a mismatch of skills in the labour market it can be caused by (Riley, 2012):

* Occupational immobilities - This refers to the difficulties in learning new skills applicable to a new industry, and technological change, e.g. an unemployed farmer may struggle to find work in high tech industries.

* Geographical immobilities - This refers to the difficulty in moving regions to get a job, e.g. there may be jobs in London, but it could be difficult to find suitable accommodation or schooling for their children.

* Technological change - If there is the development of labour saving technology in some industries, then there will be a fall in demand for labour.

* Structural change in the economy - The