Concepts of Unemployment: How to Mathematically Determine Rate of Unemployment

Today, I will be considering the concept of Unemployment. Unemployment is really increasing and becoming worrisome as well in some parts of the world. This article will cover the definition of Unemployment, Types of Unemployment, Causes of Unemployment, Consequences of Unemployment and Solutions to Unemployment. I hope you find it useful!

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Definition of Unemployment

Unemployment can be defined as a situation in which people of working age, willing, ready and capable of working are unable to find paid jobs. It simply means the lack of employment for people who are willing and qualified to work as well.

The rate of unemployment of recent is on the high side and there is a need for it to be curbed. Unemployment rate is the ratio of the total number of unemployed persons to the working population or labour force.

Mathematically, the rate of unemployment is denoted by the symbol 'U' and has the formula to be:

U = (Number of Unemployed Persons/Labour Force or Working Population) * 100%

For example, a nation has a labour force of 10 million with a total of 6 million persons being employed. What is the unemployment rate in the said nation?

Solution
Firstly, we'll have to define all the parameters.

Working Population = 10 million
Number of Employed persons = 6 million

To ascertain the total number of unemployed persons, we do a little arithmetic thus:

Unemployed Persons = Labour Force - Employed Persons
UP = 10, 000, 000 - 6, 000, 000
UP = 4, 000, 000

Therefore, unemployment rate will be calculated as follows:

U = (Number of Unemployed/ Working Population) * 100%
U = (4, 000, 000/ 10, 000, 000) * 100%
U = 0.4 * 100
U = 40%

The country's unemployment rate is thus 40%.

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Types of Unemployment

There are various types of unemployment and they include the following:

• Structural Unemployment
• Under employment
• Frictional Unemployment
• Voluntary Unemployment
• Residual Umemployment
• Casual Unemployment
• Mass Unemployment
• Seasonal Unemployment

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Casual Unemployment
This type of unemployment has to do with a situation where jobs are not permanent. Casual employment is common with the unskilled type of labour. Example is part time jobs. So where temporary jobs are available, casual unemployment is certain to occur.

Structural Unemployment
Structural unemployment arises as a result of changes in the pattern of demand of a certain commodity. This implies that if demand becomes low, it could lead to industries downsizing or reducing their workforce this leads to a structural unemployment.

Residual Unemployment
This type of unemployment arises as a result of disabilities could be physical or mental. Disable or handicapped persons fall into this group of unemployment.

Seasonal Unemployment
Seasonal unemployment takes place in industries and companies whose production or services are prone to seasonal variations. In other words, there are certain seasons for production and when such company is off season, only few workers will be required or needed which then leads to unemployment.

Under employment
This is another type unemployment that occurs when an individual works at less than his full capacity so that his work rate or productivity is below the maximum. Simply put, under employment occurs when a person is not working in a full capacity.

Mass Unemployment
This is an unemployment that takes place when there is a fall in the amount or quantity of goods being demanded for. Mass unemployment affects many companies at the same time and the one most affected will be forced to retrench workers which leads to unemployment.

Frictional Unemployment
It is also known as a technological unemployment. When there is a change in the pattern or technique of production, frictional unemployment is likely to occur. As a result of the advancement in technology, machines and robots could be adopted by a particular company for its production processes. This then brings about a replacement of manual or human labour by machines which in turn leads to workers retrenchment. It is in this aspect that one may say that technology is adversely affecting humans.

Voluntary Unemployment
This is a scenario where a person or people refuse to take up a paid job or employment even when opportunities are in availability. It is mostly attributed to laziness.

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Causes of Unemployment

There are many factors that contribute to the increased rate of unemployment in many nations. A few are discussed below:

• Over-population
  This is a major factor of unemployment. When a country is highly populated, the worker-to-job ratio will certainly not be equal as there will be more workers and few job opportunities. This will eventually result in unemployment. To avoid this from happening, countries could increase industrialization so as to create more job opportunities.

• Use of Automated Machines

• High Cost of Education

• Lack of Industrial Growth

• Poor Development Plans

• Deficiency in Demand

• Lack of Social Amenities

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Consequences of Unemployment

• Increase in crime rate
• Waste of human resources
• High rate of dependency
• Migration
• Threat to peace and stability

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Solutions to Unemployment

• Industrialization: Nations, states should focus on bringing or establishing industries as this will contribute to reducing unemployment rate.
• Population control
• Encouraging geographical mobility of labour
• Incentives to potential investors
• Proper development plans
• Re-designing the education sector
• Enterpreneurship: When people begin to think creatively and start their own businesses, it will help in the reduction of unemployment.

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Reference
https://corporatefinanceinstitute.com/resources/knowledge/economics/unemployment/
https://en.wikipedia.org/wiki/Unemployment