Factors Influencing Unemployment

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According to economists, employment and unemployment results when the supply and demand for human resources or labour is out of balance. Supply and demand are influenced by a range of forces that are the result of the interaction of economic, structural and policy factors.

Economic Factors
Economic factors affect both the supply and demand sides of labour. Demand for goods and services stimulate production which, in turn, generates employment. The resulting demand for workers affects the supply side as more workers are attracted to a vibrant labour market. The market never reaches this ideal state of balance due to a number of factors.

Business cycles ¾ Agreement among economists is rare, but they do agree that market-driven economies move in cycles and it is during the dips that unemployment may result. The cause of cycles is not as clear, but it is generally agreed that it is a function of supply and demand.

Industrial adjustment ¾ Production may move from high wage countries to low wage countries, from old inefficient facilities to newer ones, and these leave a trail of unemployed workers.

Not enough jobs ¾ Shifts in the world economy affect job availability. Not enough jobs to go around can result from a declining manufacturing sector, a growing service sector, changing consumption patterns, technological developments, or third world competition. Hundreds of thousands of jobs have been lost in manufacturing and goods producing industries in Canada, while at the same time numerous jobs have been created in the technology and service sectors. Unfortunately, the creation of new jobs does not always make up for lost jobs, particularly when jobs overall move to low-wage countries.

Structural factors
Factors such as the aging of the population, labour force participation rates, migration patters, skills available/demanded, environmental regulations, technological change and the rate of job changes all the number of unemployed.

A growing labour...
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