Employment
Employment refers to the number of people who are currently working and earning a wage or salary. It is a key component of economic well-being and contributes to individuals’ income, financial stability, and overall quality of life.
Employment can be categorized into various types, such as:
Formal Employment: This includes jobs in which workers have formal contracts with employers and are entitled to benefits, legal protections, and social security.
Informal Employment: Informal employment involves jobs that lack formal contracts, job security, and often benefits. It includes self-employment, casual labor, and work in the informal sector.
Full-Time and Part-Time Employment: Full-time employment typically involves working 35-40 hours per week, while part-time employment requires fewer hours.
Temporary and Permanent Employment: Temporary jobs are of limited duration, whereas permanent jobs are expected to last indefinitely, subject to performance and other factors.
Frictional Unemployment
- People often leave their jobs voluntarily to search for better employment opportunities. They may be dissatisfied with their current job, seeking career advancement, or exploring new industries. During the job search process, they are temporarily unemployed.
- Individuals who have recently completed their education or training, such as students graduating from college or vocational programs, are new entrants to the labour force. They may not find suitable job matches immediately, leading to frictional unemployment
- When people relocate to a different city, state, or country, they often experience a period of unemployment as they seek employment in their new location. Geographic mobility can result in temporary joblessness
- Seasonal workers, such as agricultural labourers, retail employees, or tourism workers, experience periodic job loss due to the nature of their industries. Their unemployment occurs when the season ends and resumes when demand returns
- Workers may leave their current jobs due to reasons like dissatisfaction with job conditions, company culture, or lack of opportunities for advancement. They choose to leave before securing a new job, leading to frictional unemployment
- Some individuals may have skills that do not immediately match the requirements of available job openings. They may need time to identify training or education opportunities to acquire the necessary skills, resulting in unemployment
- Frictional unemployment allows individuals to search for job opportunities that better match their skills, qualifications, and preferences. This process helps maximize the efficiency of the labour market, as people are more likely to find positions that suit them well
- The existence of frictional unemployment signifies labour market flexibility, enabling workers to leave jobs that no longer meet their needs and seek more suitable positions. This flexibility can promote economic dynamism and innovation
- Job seekers in frictional unemployment often have the ability to negotiate for higher wages or better working conditions as they explore new opportunities. This can lead to wage growth and improved job quality.
- Some individuals experiencing frictional unemployment may use the opportunity to start their own businesses, contributing to entrepreneurial activities and economic growth
- Individuals who are between jobs may experience a temporary loss of income, which can lead to financial stress. This may affect their ability to cover living expenses
- Frictional unemployment, if prolonged or at high levels, can create upward pressure on wages. Employers may need to offer higher salaries to attract and retain talent, which can lead to inflationary pressures
- Extended job search periods can result in economic inefficiency, as some people spend more time than necessary searching for employment. This can lead to the underutilization of labor resources
- Long periods of frictional unemployment can lead to skill erosion as individuals may not use their skills or knowledge effectively while job searching. This can affect their long-term employability and career prospects
- Frictional unemployment can reduce consumer spending, as those temporarily out of work may cut back on their expenses, affecting overall demand in the economy
Structural Unemployment
a.Causes of Structural Unemployment:
Technological Advancements: Technological changes and automation can render certain jobs and skills obsolete. Workers with outdated skills may find it difficult to secure employment without retraining.
Shifts in Industry Demand: Changes in consumer preferences, globalization, and evolving market conditions can result in shifts in demand for specific products or services. Industries in decline may lay off workers, contributing to structural unemployment.
Geographic Mismatches: Structural unemployment can be exacerbated by geographic disparities, where jobs are available in one location but job seekers are concentrated in another. This requires mobility or retraining to address.
Educational Mismatches: A lack of alignment between the skills and qualifications that educational institutions provide and the skills required by employers can lead to structural unemployment. This is particularly relevant when educational curricula do not adapt to changing labor market demands.
Aging Workforce: As the population ages, older workers may find it difficult to adapt to new technologies or meet the skill requirements of emerging industries. This can result in structural unemployment for older individuals.
- Recession: A period of negative economic growth
- Downturns in a business cycle: Demand for goods and services decreases over time
- People spending less money during economic declines: Reduced demand for products and services causes a decrease in production
- Companies earning less revenue: Need fewer workers to meet demand, resulting in layoffs
Seasonal unemployment occurs when individuals employed in seasonal jobs face joblessness due to a decline in the demand for labor. This typically happens when a specific period or season concludes, such as the end of a holiday or changes in weather. It represents a temporary phase during which the availability of job opportunities decreases. While any form of unemployment poses challenges, seasonal unemployment is transitory. With the arrival of the peak season in a particular industry, many workers usually find employment once again.
Examples of seasonal employment encompass various sectors, including tourism businesses like winter-themed resorts and ski parks, retail industries that hire and train employees in preparation for the winter holiday rush, and shopkeepers who enlist temporary staff during festival seasons.
In the broader context of unemployment in an economy, four primary types exist: Frictional unemployment, Structural unemployment, Cyclical unemployment, and Seasonal unemployment
Causes of Seasonal Unemployment:
Seasonal unemployment results from the seasonal nature of specific jobs and low demand after the peak season. People engaged in such employment become unemployed after the peak season. For instance, commodities like umbrellas sell only during certain times of the year.
Seasonal unemployment occurs when demand for certain jobs or industries fluctuates due to seasonal variations or weather conditions. For example, agricultural workers may face unemployment during off-seasons when there is no need to plant or harvesting crops
Long-term unemployment refers to a situation where an individual remains without employment for a duration extending 12 months or more. The long-term unemployment rate quantifies the percentage of the labor force that has been jobless for over six months.
There is a notable disparity in long-term unemployment rates, with low-qualified workers experiencing three times higher rates than their highly qualified counterparts. This phenomenon affects a slightly larger proportion of men (54%) compared to women (46%), and the age distribution is relatively even, with slightly elevated rates observed before the age of 30 and after 55.
The causes of long-term unemployment are twofold, stemming from cyclical unemployment and structural unemployment. Additionally, the term “chronic unemployment” is synonymous with long-term unemployment and is prevalent, particularly in underdeveloped countries characterized by pervasive poverty
Causes of Long-Term Unemployment:
- Economic downturns and recessions can lead to a prolonged reduction in job opportunities. When industries contract, companies may be slow to rehire, resulting in long-term unemployment
- Changes in the structure of industries or shifts in technology can render certain skills obsolete. Workers with outdated skills may struggle to find suitable employment, contributing to long-term unemployment
- Disparities in educational qualifications can play a role. Low-qualified workers often face higher rates of long-term unemployment compared to their highly qualified counterparts
- Individuals at the extremes of the age spectrum, particularly those younger than 30 and older than 55, may experience higher rates of long-term unemployment. Younger individuals may lack experience, while older individuals may face age-related biases
- The longer someone remains unemployed, the more discouraged they may become. There can also be a social stigma associated with a prolonged employment gap, making it challenging for individuals to re-enter the workforce
- Government policies, or the lack thereof, can impact long-term unemployment. Adequate support systems, job training programs, and economic stimulus measures can mitigate the effects of prolonged joblessness
Disguised unemployment can arise from various factors, such as:
The introduction of new technologies can contribute to disguised unemployment.
Mismatches in the demand for specific types of workers can result in disguised unemployment.
Incomplete understanding of employees’ skill sets can lead to disguised unemployment.
Factors in rural areas, like high illiteracy rates, limited technological development, and population pressure, can contribute to disguised unemployment.
Rapid population growth can lead to surplus labor, particularly in rural regions.
Poverty can restrict individuals’ access to capital, making it challenging to acquire land.
A low capital-to-labor ratio can contribute to disguised unemployment.
Limited availability of skilled labor can be a contributing factor.
Individuals not working to their full potential or engaging in duties with minimal impact on productivity can contribute to disguised unemployment.
People who are unemployed but not actively seeking work can be part of disguised unemployment.
Temporary inability to work due to illness or partial disability can also contribute to disguised unemployment.
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