Impact of Unemployment on Economic Development

Impact of Un purpose on Economic DevelopmentUnemployment has become an issue of major concern in different countries this is as because a lot of individuals atomic number 18 ready and operational to work but atomic number 18 not able to secure this job opportunities. Different studies and expert analysis on Economics apply discovered the various reasons as well as rears that unemployment has caused and have made effort to locate some of the paradoxs. the irregular recover in scrimping as well as downward nonparallel review in the festering of parsimoniousness and projections has made substantial impact on the situation of employment on global scale. The report of the International Labour Organization ILO(2014, P.11) observed that around the world, there atomic number 18 over 200 million people who are unemployed people as at 2013, this an increase of roughly 5 million compared with the year before In many countries, competition in the market is a major cause since the employment opportunities are few. As a result the few opportunities have likewise many qualified individuals chasing it Nitzan (2011, p.4) compared unemployment and labour market with the case of demand, supply and price indexScale of the problem and EvaluationUnemployment and food price pomposity Unemployment has been cited as being a major amicable loathsomeness a cause the rise in poverty. It produces social as well as economic fix which also is a major issue of club. The problem of poverty among those who are unemployed is often rattling luxuriously delinquent to the fact that these somebodys are not able to have a sustainable pith of income. Looking at it from the social angle, there is an increase in illegitimate means of earning a living. If you calculate an environment with high unemployment rate, you will notice that such place has increase in various social vice like gambling, robbery, bribery, prostitutuion etc. This accounts for the social insecurity issues c reated by unemployment (MCgrath 2012, p.1)Youth unemployment loss of resources particularly human resources is another problem unemployment creates. With millions of able bodied men and women not able to put their skills and talent to use. This effect makes the persons un profitable, thence making the economy suffer in not using those productive abilities. Such economy experiences slow growth at the various sectors the tertiary sector being the most affected as a result of the sector not getting enough funds to sustain it. A elevate impact is the slow rate of self-employment as savings is not easy for the large population of unemployed then they have little or no capital for investitures. The situation of unemployment in a society will greatly impoverish the citizens as employers tend to take advantage of the situation to pay in truth small for labour. Such economy experiences a devaluation of labour as the employers take the upper hand.Economic growth in certain industries whe n theres a boom in some industries, there is sudden influx of people to that industry. It will not be easy to accommodate an change magnitude population of people who want to be part of that sector. For example an economic growth in the textile industry will increase the sight into that sector, which will often force individuals to focus attention in the textile industry and ignore skills available in other sectors. With such push, unemployment will gradually set in first for that industry and ulterior on due to reduced skill available for the other sectors, unemployment spreads to other industries.Causes of the ProblemsThe demand-side causes are Economic troll The Competition for labour is the reason unemployment seems to have stronghold in many economies. Since opportunities get fewer with increasing population. The result of this is that for every available position, there are several qualified individuals and as one person gets the position, another becomes unemployed. Indee d the present shift in labour demand has worsened the situation so far to a greater extent, as engineering science driven labour is taking over people driven labour thus more people redundant as one machine replaces the task of human effort. Employers consider the technology driven labour of greater benefit since the idea of multi tasking also encourages on man operating more than one machineLack of Government investment and Spending Sometimes the government fails to make investment that provide job opportunities while other times the government policies do not provide contributory environment for private sector investment.Supply Side causes admit Rising global commodity prices, high labour cost and poor workforce skills and lack of infrastructure. Apart from the demand and supply side causes of unemployment the deputise rate from one land to another can greatly affect the unemployment rate in that region. For example, due to the technology driven labour, a lot of employment o pportunities are open to countries where labour is cheaper, thus cause an increase in unemployment in the countries where labour is emigrating (ILO 2014, p.18). This migration of labour from higher economies to the lower economies places competition of employment on the higher economies as employers keep looking for economies with cheaper labour. One of the theories on unemployment rate and its tellingship with the growth of economy is the Okuns law.Okuns law is a statistical analysis of the relationship that exist between the unemployment rate of a country and the economy growth of that country. (Fuhrman 2015, p.1) Okuns law as explained by the St Louis Federal Reserve Bank is judge to identify t he extent of the gross domestic product (GDP) of a country could be lost as a result of the unemployment rate rising more than its usually rate. Furthermore, it explains that the idea keister Okuns law is that the amount of labour depends on output. Which implies that there exist some positive relation between employment and output (Fuhrman 2015, p.3) that is total employment is equal to the subtraction of the unemployed from labour thus a reverse relationship between unemployment and output.The most significant of these problems are exchange rate and the competition from the lower wage economies. The policies that will be most effective in dealing with these problems vary gibe to the problem. For example for Structural unemployment Investment in education and training to give workers new skills will effective. Others includeCyclical unemployment caused by a fall in consumer spending will require reduction in income tax rates which is a Fiscal form _or_ system of government (ILO 2014, P.36)For Cost-push pomposity caused by increasing labour costs an effective policy would be to encourage immigration and investment in technology (Nitzan 2011, P.7)For the problem slowing economic growth caused by falling exportings, stimulating domestic consumer spending and f inding new export marketsWhen Fiscal Monetary policy are implemented the following are possible effectsExpansionary policies are likely to Increase economic growth, reduce unemployment, and increase inflation. It was A.W. Philips(as cited in Nitzan 2011, p.3) who first examined the relationship between inflation and unemploymentContractionary policies are likely to Reduce economic growth, increase unemployment, and reduce inflationFor long term minuscule term or Long term effect can produce some of the effects beneath as further illustrated by the diagram belowDemand-side policies can move an economy closer to its take Possibility Frontier assuming where all resources are usedSupply-side policies are needed to expand the productive potential of the economy i.e. move the PPF outwardConclusionUnemployment affects the economy in many different ship canal but it can be minimized by strategic Government intervention. There are policies that divine service to contain the effect of un employment considering that some of the causes can be handled with some of the economic policies. However the choice of the policy has to be analyzed carefully to produce relevant result. For example reducing income tax will sole(prenominal) increase consumer spending if the marginal propensity to consume is high. ILO (2014, P.27) pointed that Policies to reduce inflation might have a negative effect on unemployment economic growth (and vice versa) and improving education might acquit the problem in the long term but not in the short term annexe LISTFuhrman, R 2015, Okuns Law Economic Growth and Unemployment Retrieved from http//www.investopedia.com/articles/economics/12/okuns-law.aspILO 2014, Global Employment Trends 2014 take a chance of a jobless recovery International Labour Office. GenevaMcgrath Native Council 2012. Causes and Effect of Unemployment Retrieved from http//mcgrathnativecouncil.org/interesting-academic-essay-example-on-unemploymentNitzan, J. 2011, Mcroeconomic Perspectives on Inflation and Unemployment, McGill University855 Sherbrooke St. West Montreal