Unemployment, also referred to as joblessness, occurs when people are without work and are actively seeking employment. During periods of recession, an economy usually experiences high unemployment rates. There are many proposed causes, consequences, and solutions for unemployment.


Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force.

Unemployment Rates by State

Who is counted as unemployed?

People are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:

  • Contacting:
    • An employer directly or having a job interview
    • A public or private employment agency
    • Friends or relatives
    • A school or university employment center
  • Submitting resumes or filling out applications
  • Placing or answering job advertisements
  • Checking union or professional registers
  • Some other means of active job search

Passive methods of job search do not have the potential to connect job seekers with potential employers and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.

Workers expecting to be recalled from temporary layoff are counted as unemployed whether or not they have engaged in a specific job seeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).

Types of unemployment

There are basically four types of unemployment: (1) demand deficient, (2) frictional, (3) structural, and (4) voluntary unemployment.

#1 Demand deficient unemployment

This is the biggest cause of unemployment that happens especially during a recession. When there is a reduction in the demand for the company’s products or services, they will most likely cut back on their production, making it unnecessary to retain a wide workforce within the organization. In effect, workers are laid off.

#2 Frictional unemployment

Frictional unemployment refers to workers who are in between jobs. An example is a worker who recently quit or was fired and is looking for a job in an economy that is not experiencing a recession. It is not an unhealthy thing because it is usually caused by workers looking for a job that is most suitable to their skills.

#3 Structural unemployment

Structural unemployment happens when the skills set of a worker does not match the skills demands of the jobs available or if the worker cannot reach the geographical location of a job. An example is a teaching job that requires relocation to China, but the worker cannot secure a work visa due to certain visa restrictions. It can also happen when there is a technological change in the organization, such as workflow automation.

#4 Voluntary unemployment

Voluntary unemployment happens when a worker decides to leave a job because it is no longer financially fulfilling. An example is a worker whose take-home pay is less than his or her cost of living.

Reason for unemployment

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Unemployment is caused by various reasons that come from both the demand side, or employer, and the supply side, or the worker.

From the demand side, it may be caused by high interest rates, global recession, and financial crisis. From the supply side, frictional unemployment and structural employment play a great role.


Unemployment is a big problem which effects the economic growth of the country. It has following bad effects:

(i)Exploitation of labour:

Due to unemployment labourers are exploited. They have to accept low wages and work under un-favourable conditions.

(ii)Industrial disputes:

Industrial disputes arise because of unemployment. It has adverse effects on employer-employee relations. Due to industrial disputes, the unemployment rises.

(iii)Political instability:

There is political instability in the country due to unemployment. Unemployed persons engage themselves in destructive activities. They consider Govts, worthless. Economic development becomes difficult under conditions of political instability.

(iv)Social problem:

Many social evils like dishonesty, gambling and immorality etc. arise due to unemployment. It endangers law and order situation of the country. It causes social disruption in the society.

(v)Increase in poverty:

Under the situation of unemployment a man has no source of income. Unemployment causes poverty. Burden of debt increases. Economic problems increase.

(vi)Loss of human resources:

Due to unemployment, human resources go waste. No constructive use of labour force is made. If human resources are properly used, economic growth of the country will increase.

some ways to reduce unemployment

  1. remove all taxes/fees on lower end workers and the products they are most likely to buy. Shift that burden to pollution taxes and taxes on cocentrations of wealth.
  2. Tie tax/regulatory relief for businesses to increased employment
  3. raise the EITC to stimulate the economy in the areas that are having the most problems
  4. adopt a much more carefully selective immigration policy that tends to exclude people who would be seeking entry level jobs
  5. adopt a balanced trade policy. I like Buffets import certificates, which are a flexible tarriff. Howeve,r I would exclude stuff like machines for factories
  6. Move towards a basic income/universal health care. Folks with prolong unemployment or medical issues can become unemployable even if they weren’t at the start. This migth start with military veterans and former peace corp/VISTA volunteers.
  7. I would confine increases of the minimum wage to adjustments for local living costs. this will reduce the funds needed for 3. above. There is some evidence that higher minimum wages cause employment problems in low rent areas but may raise employment in higher cost of living areas.
  8. Major infrastructure improvements could act as a significant stimulus.
  9. The internet and expanded credit by examination can provide mass education at very low overall cost and no net charges to students. Open source projects like MIT open courseware can be readily expanded and aid for credit by examination can be made very easy to get. I would pay for that by a tax on inreases in investments that exceed historical rates upon the upper 1%.
  10. I would switch away from broad payroll taxes and consumption taxes to taxes on asset concentration to couner the trickle up effects we have seen in recent years but be careful to avoid taxing investors likely to have asset appreciation below that we have seen among the upper 1%. The idea here is to remove all barriers to saving among the bottom 95%
  11. Track national jobs creators and give leaders in those industries real govenrmental attention and help
  12. Change the health care system so workers can easily change employers, retrain or open a business without risk of loosing health insurance.

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