Causes and Effects of Unemployment – Academic paper sample

Unemployment is a setback in many countries, as many citizens are willing to work, at the current labor market, but cannot secure employment. Economic experts identified the causes and effects of unemployment in an effort to try and solve the problem.

Causes of unemployment

The main cause of unemployment in many countries is competition in the labor market, as there are few employment opportunities. This leads to a situation where for every available opportunity, there are more than one qualified individuals. This means that when one gets employment, others will lack employment. Currently increased technology shifts production from labor intensive to capital intensive. When these machines replace workers, they lack employment hence contributes to unemployment.

Effects of unemployment

Unemployment causes social and economic effects, which turn out to be a problem to society. The poverty index among the unemployed is high since these individuals do not have a source of income. On the social front, it increases illegal means of earning livelihoods. In a place where unemployment is on the rise, such a country has high cases of robberies, gambling, prostitution and bribery. This is a reason why unemployment contributes to social insecurities.

Unemployment leads to loss of resources, and especially human resources. Unemployed individuals are unproductive, which means the economy does not utilize their production abilities. In such an economy growth of different economic sectors will be slow. These sectors and especially the tertiary sector do not get enough funding as the available funds are not sufficient to finance the sector. In such an economy, the rate of self-employment is low since they do not save money; hence there is little capital available for investments. High unemployment rate makes many employers pay less for labor. In such an economy, value of labor is less than it should be since employers will want to take advantage of the unemployed.