Discussing Why Unemployment Is Such an Important Issue

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Discussing why unemployment is such an important issue

for governments and how it can be tackled in urban areas.

AUTHORED BY
Simon D. Ojera

CONTENTS

PAGE

1.0Introduction…………....…………………………………….…………………………...1

2.0The Concepts of Unemployment………………….……….…………………………….1

2.1Definition..………………………………………………………………………...2

2.2Causes of Unemployment…………………………...……………………….……3

3.Effects of Unemployment………………………… …………………………………...10

4.Tackling Unemployment in Urban areas………………….. ………….……………...13

5.Conclusion and Recommendations …………………………………………………...14

6.References ………………………………………………………………………………15

1. INTRODUCTION
Two serious economic nightmares African governments and the world in general are facing are unemployment and inflation. In Africa, the situation has been made worse by the high birth rate resulting into demographic pressure. As a consequent, there are increasing numbers of new entrants to the labour market negatively proportional to the growth in productive employment. "More than 200 million people globally are reported out of work (Business Week, 2011). This statistic indicates that two third of developed economies and half of developing countries are experiencing a slowdown in employment growth, the paper said. In Africa, unemployment and under-employment is a big problem to the member states. According to ILO, 2008, high unemployment remains one of the greatest challenges to Africa’s development. This has and continues to be a major concern to both member states, policy makers and all other stakeholders. The continuous increase in unemployment has seen increasingly rising poverty level in the sub-Sahara Africa. Pollin et al, 2007, in their study under a UNDP project indicate that in 2005/2006, a large number of individuals who are working could be categorised as working poor because their labour earnings were below the poverty line. This finding is typical of the sub-Sahara Africa situation. To measure unemployment, we consider the prevailing unemployment rate. Unemployment rate is defined as a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force (Wikipedia, 2012) Although of late many African economies has seen improvement in economic growth and performance, the equivalent results has not transformed into reducing unemployment and unemployment rate due to slow growth in productive employment and income generating projects has been below the growth in labour force. Various scholars differ on their explanation of the cause of unemployment. Keynesian economics proposes that there is a “natural rate” of unemployment because the skills of labourers and the positions available are slightly out of sync even under the best economic conditions. Neoclassical economics postulates that the labour market is efficient if left alone, but that various interventions, such a minimum wage laws and unionization, put supply and demand out of balance (Investopedia, 2012). 2.0CONCEPTS OF UNEMPLOYMENT

2.1Definitions
At any point in time, the population of a country comprise the economically active and those that are economically inactive (Borjas, 2004). The economically active is grouped into those in the labour force and those outside the labour force. The labour force is finally grouped into employed individuals and the unemployed individuals. The unemployed individuals are those persons who are out of job, but available and searching for work at the prevailing wage rate. This is the standard definitions used for reporting unemployment statistics. However, where a large population of the workforce comprise discouraged workers or those involved in informal sectors or subsistence farming as is the case in Africa, the definition of unemployment excludes those that are not taken steps to seek employment. Thus put in...
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