Employment: people are said to be employed if they engage in some economically productive activities with the purposes of earning income/money.

Employment can be divided into two types mainly:-

  1. Self employment/informal employment
  2. Salaried/wage or formal.

Self employment/informal

Is a situation where an individual works for himself to earn income which may be inform of profits, interest or rent.

Salaried/wage employment

Is a situation where an individual sells his/her labour/service to another and is paid wage/salary.

Employment rate

Refers to the total number of people employed expressed as a percentage of the total number in an economy.

Employment Rate (ER) = Total number of Employees * 100%

                                                Total number of population

Unemployment –Is a situation where labour force is idle at the ongoing market wage rates i.e. is a situation where an individual is willing to work at the existing market wage rate but cannot find a job.

Unemployment rate

Refers to the total number of people unemployed expressed as a percentage of the total number of people in an economy.

Concept of underemployment

Is as situation where labour is not effectively employed to its full potential leading to under utilization of the workers ability or potential.

There are two categories of unemployment namely:

  1. Involuntary unemployment- this is a situation where members of the labor force are idle and willing to work but are unable to find work at the existing situation and ongoing market wage rate.
  2. Voluntary unemployment- this is a situation where jobs are available but the individuals do not want to work at the ongoing market wage rate.

Causes of voluntary unemployment:-

  • Laziness-people who are lazy hate work and prefer to remain unemployed even when the jobs are available.
  • Availability of socially unacceptable jobs
  • Accumulation of past savings
  • Low wage rate/poor remuneration
  • Existence of good economic backgrounds
  • Expectations of better future jobs
  • Being too qualified for the jobs
  • Unfavourable geographical location of jobs
  • Desire for leisure
  • Poor working conditions
  • High risks in involved in doing the jobs

General causes of involuntary unemployment:-

  • Rural-urban migration; when people move from rural to urban areas, the demand for jobs exceed the supply for jobs in the urban areas causing open urban unemployment.
  • Seasonal variation in economic activities especially in the agricultural sector
  • Natural disabilities
  • High population growth rate
  • Inappropriate education
  • Labour immobility
  • Technological changes
  • Structural adjustment programmes
  • Low rate of investments
  • Decline in demand for products

Types and causes of unemployment

  1. Cyclical unemployment

Is a temporary unemployment caused by lack of aggregate demand due to economic recessions/depressions; also referred to as demand deficiency/Keynesians unemployment

  1. Structural unemployment

It arises due to lack of factor mobility. If the demand for a specific factor in its present occupation falls then such factor becomes unemployed.

Structural changes may result due to:-

  1. Changes in demand resulting in changes in consumers’ tastes and preference that lead to changes in composition of goods and services produced.
  2. Changes in supply caused by lack of factors of production.
  3. Changes in technology: if they result in the use of labour saving techniques as those of labour saving machines may render workers redundant.
  4. Frictional unemployment

Is a sub category of structural unemployment. It arises because of the time lags occurring in the functioning of the labour market and which are inevitable in a free market economy for instance the delays in moving from one job to another.

  1. Seasonal unemployment-Occurs on a regular basis when workers are kept out of employment at regular intervals of period. It is caused by annual regular variation of seasons and mainly affects agricultural sector and other outdoor activities e.g. tourism, constructions.

In developing countries, this type of unemployment is widespread in agriculture where periodic changes in weather renders labour idle especially after harvesting and planting.

  1. Residual unemployment-Refers to unemployment due to mental disability of those concerned. The solution to this type lies in the provision of special educational training to the disabled persons and other special packages of the affirmative action.
  2. Disguised unemployment-Occurs when the work available given the labourforce is insufficient to keep it fully employed so that some members of the workforce could be withdrawn without any loss of output. Occurs when the marginal product of labour is zero

Measures and Management of unemployment

  • Fiscal policy

There should be adequate expenditure (public and private) to prevent deficiency of demand. In this case, the Government has the duty of actively stimulating demand through public investment to supplement the inadequate private investment. This can be achieved through expansionary fiscal policy where the government adopts fiscal policy by decreasing taxes, providing subsidies and increasing its expenditure and utilities so that investment increases and more jobs are created.

  • Expansionary monetary policy: the attempt by the government to adopt policies to increase money supply in an economy. When the government adopts expansionary monetary policy e.g. by reducing interest rates, reducing legal reserve requirement e.t.c. More money is available in the hands of both consumers and entrepreneurs and they are encouraged to borrow more money from commercial banks for investment purposes which in turn increases job opportunities.
  • Population control policies: to reduce pressure which population explosion exerts on employment, the government can adopt population control measures in a way to reduce unemployment.
  • Training programs for workers; the government can provide continuous training programs for workers so that they can have a variety of skills that enables them to change employment during periods of structural adjustment.
  • Manpower planning: the government can ensure that only relevant skills that are demanded and the rate of labour supply required in the economy is produced in a given time period. This helps in ensuring balance between the demand and supply in the economy.
  • Diversification of the economy: the government can introduce to the economy a variety of economic activities to be undertaken so as to reduce seasonal unemployment.
  • Industrialization strategy: since industries have a high rate of job creation, the government can encourage the expansion of the industrial sector by both the local and foreign investors.
  • Technological improvement and adoption of appropriate intermediate and appropriate technology: the government can improve on the state of technology to reduce over reliance on nature whose variation causes seasonal unemployment e.g. introduction of irrigation system. The government can also encourage the adoption of technologies which are employment creative e.g. labour intensive technologies which provide job opportunities to workers.
  • Provision of credit facilities: the government can give credit facilities to potential investors to create employment opportunities and also to encourage self help projects.
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