Critical Analysis of Unemployment: Economic Theories and Policies

This report provides a critical analysis of unemployment, a major macroeconomic issue. It defines unemployment, explores its causes including population growth, technological changes, lack of skills, psychological and social problems, financial costs, and slow economic growth. The report examines the effects of unemployment such as exploitation of labor, organizational disputes, increased poverty, lower living standards, loss of human resources, decreased GDP, and slow economic development. The report also addresses the current situation of unemployment, particularly highlighting the impact of the COVID-19 pandemic. It then discusses relevant economic theories, focusing on Keynes' theory of involuntary unemployment, and proposes strategies to overcome unemployment, including cutting interest rates, increasing government expenditure, and cutting taxes. The report concludes by emphasizing the need for governments to use monetary and fiscal policies to control unemployment.

UNEMPLOYNMENT
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Critically analysis of unemployment...........................................................................................3
CONCLUSION................................................................................................................................6
REFRNCES.....................................................................................................................................6
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INTRODUCTION
Unemployment is major problem related with macro economics; it is a situation in which willing
people cannot find out job. In order to understand the concept of unemployment this report has
been prepared, in which meaning of unemployment, main causes of this problem has been
defined. This report also included the effect of unemployment on economy and theories
developed regarding unemployment as well as this reports also included the way and policies
through which government can control the problem of unemployment in brief manner.
TASK 1
Critically analysis of unemployment
Meaning of unemployment: This term refers as a situation or condition in which a willing
individual not able to find job. It includes both educated and uneducated personals.
Unemployment, is a phenomenon which occurs when a person who s actively searching for
employment is unable to find workout is one the biggest issue since developed of economies.
People did not find out their ideal job and they are not happy for the position even they get job. It
is the issue related with macro economics(Heid. and Larch 2016).
Causes of unemployment: There will be many reasons why world suffers from the problem of
unemployment. The issue is arises from demand as well as supply side. From the side of demand
unemployment issue arises due to give rate of interests, global recessions and lack of monetary
resource. The other side frictional, mismatch of skills, geographical immobility are main cause’s
unemployment.
Increase of population: This is the main reason of increasing rate of unemployment, due to
higher population the demand of jobs is increase but there will b no sufficing numbers of jobs are
available to fulfil demand of pubic thus higher population countries specially, China, India,
Pakistan suffers from this problem.
Changes in technology: Due to changes of time, the technologies also changes and things were
made by ands is now made with the uses of machines and technical divides thus many
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individuals lost their work especially low class workers. There place is taken by which class
machines.
Lack of education skills: Higher educated people does not get their ideal job, in the present time
, many students were competed their gradations and post graduation in higher course thus their
demand regarding job and package also higher, unemployment rate is increases due to not
getting ideal job by skilled personals.
Psychological and social problems: It is also a cause that psychological condition of individuals
directly effect on their work. Due to conflicts arise between the managers and works, the workers
resigned and leave jobs even many political policies and social environment of or migrant
workers also negatively affect them thus they leave the it jobs.
Higher financial cost: Development of own work, industries or small enterprises also required
higher cost with high risk , thus many people not take risk and accept their unemployment
situation.
Slow economic growth: In under developed and developing countries unemployment is major
issue because of their slow economic growth, they unable to take loan or financial help from
international organization and governed of theses countries not properly provides help to raise
standard of unemployed personals and provides them employment and help them to established
their own resource this the issue of unemployment (Gohmann and Fernandez, 2014).
Effect of unemployment: It is major problem facing by the world following are the effect of
unemployment:
Exploitation of labours: Due to issue of unemployment workers accept the low wags rate and
get exploited by owners. It will directly effect on their life style also and their mental health as
they did not get the value they want although they want to live high standard life .
Organizational disputes: The main reason of dispute and conflict between employers and
employee is rate of wage; unemployment is also affecting their relation. Which affect
productivity. It is the main reason and unemployment directly effect negatively to the business
organizations working operating business activities.
Increment in poverty: Due to unemployment developing and under developed countries suffers
from high poverty rate.
Effect on living standard: Personals living standard get changes their standard decrease and
they adopt a poor life style du to lack of money.
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Loss of human resource: Due to this problem business not effectively use their labours and they
felt issue of skilled work force.
Decrease of GDP: People not able to contribute in GDP rate of country and thus the supply of
money and the rate of GDP are goes decreases.
Slow economic development: Unemployment is major reason of slow growth and development
rates in countries.
Current situation economy related with issue of unemployment’: At present time the whole
world is suffers from COVID 19 pandemic thus l the industries get shut down there will be no
work, it will directly impact of employment at present time persons lost their jobs in World
more than 10 million people lost their jobs due to this dieses. In America, Britain all these
countries suffers from highest unemployment rate There unemployment rate increase form 15 to
20%. And there will be no future policies which will help people to find jobless this pandemic
take times and it will take 2 to 3 years to get back normal life, This will adversely impact on the
world economy due to unemployment, the GDP rate decreases the economy rate, also decrees ,
sensex goes down. All the investment get into losses. Unemployment cost to the world more than
just financial it will directly affect on the present of mind set of personals. Due to unemployment
they not only lose their income source but lost suffers from physical and mental health changes.
Theories related to unemployment: There were be many theories developed regarding
unemployment but Keynes theories has more appropriate than others. According to the Keynes
he give theory related to involuntary unemployment (Nunley, Pugh, Romero and Seals, 2017).
Keynes suggested that full employment condition can be defined as sort of coincidence of
astrological., if personals do not find employment in going wages rate station than it would be
known an involuntary unemployment situation. For developing this theory, Keynes reject the
assumption related with wages price rate flexibility. Scoping to Keynes point of view the wage
rate is inflexible and it has 2 major reasons. First is related with money illusion and second is
related with institutional reason. The wage rate cannot be decreases as the trade union will not
accept the decision of redaction in wage rate((Marelll and Signorelli, 2016). There will b no
situation in which wages not raise one the unemployment achieved it level the wage raise.
Keynes argument related with the supply unction. Keyes labour supply curve has 2 parts, one is
related with flexible elastics and the second is demand curve. According to Keynes wages
rigidity is the main reason of unemployment. It refers as than free enterprise capitalist economy
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is always fallow get the full employment just because of wage rigidity. Due to liquidity trap
interest investment inelasticity. This theory provides the knowledge regarding involuntary
unemployment and ways to overcome the problem. Which the whole world faces now.
Strategies to overcome unemployment problem: By using following plans of Keynesian
government able to reduce problem and issue of unemployment:
Cutting interest rate: By using monetary tool , when government cut the high interest rates on
loan , it will directly enhance investors to invest in business and reduce problem of
unemployment. With the use of effective monetary policies governments ae to reduce the
problem of unemployment. Reducing interest rat will direct attract the investors as well as
traders also to invest in new projects.
Increases the money supply by providing more money in the economy the issue of
unemployment will be reduces (Devece, Palacios-Marqués and Alguacil, 2016).
Increment in government expenditure: Government need to provide various facilities and
started schemes to unemployment worker so that they can provided them jobs and secured their
future by incurred expenditures on big projects and proposals. Through which they expend their
organizations market.
Cutting taxes: Governments of counters need to cut the higher tax rate it will help in increase
the consumptions. High rate of consumptions means high requirement of employers. As well as
they also decrease tax rate on profit it will also help in increases the money supply to the
economy. And owners are able to provide incentive and high wage rate to workers this will
positively impact on their mental heath.
CONCLUSION
From the above analysis it has been identified that unemployment is a condition in which a
desired personal unable to find out required job which help in increase their skills. The
whole world is facing this issue because of the populations, slow growth rate, facing
resource, and now COVID 19. Unemployment directly affect on the capital structure of
economy as peoples lost the jobs and they don’t have financial resource to fulfil their needs.
In this satiation to overcome the negative effect of unemployment governments need to use
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Keynes theories, by using tools of monetary and fiscal policies they can able to control the
situation and issue of unemployment.
REFRNCES
Devece, C., Palacios-Marqués, D. and Alguacil, M .P., 2016. Organizational commitment and its
effects on organizational citizenship behavior in a high-unemployment
environment. Journal of Business Research, 69(5), pp.1857-1861.
Heid, B. and Larch, M., 2016. Gravity with unemployment. Journal of International
Economics, 101, pp.70-85.
Gohmann, S.F. and Fernandez, J .M., 2014. Proprietorship and unemployment in the United
States. Journal of Business Venturing, 29(2), pp.289-309.
Nunley, J. M., Pugh, A., Romero, N. and Seals, R.A., 2017. The effects of unemployment and
underemployment on employment opportunities: Results from a correspondence audit of
the labor market for college graduates. ILR Review, 70(3), pp.642-669.
Marelli, E. and Signorelli, M., 2016. 10 Youth unemployment and the disadvantages of the
young in the labour market. Varieties of Economic Inequality, 1, p.197.
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