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Causes and Effects of Unemployment

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Causes and Effects of Unemployment
Causes and Effects of Unemployment Unemployment defined by the Encyclopedia Britannica is the condition of one who is capable of working, actively seeking work, but is unable to find any work. In addition, to define a person as unemployed, the person must be an active member of the labor force in search of work. (Encyclopedia Britannica, 2012) There are three different types of unemployment: frictional, structural, and cyclical. Due to various causes in the economy, there will always be a certain number of people that are frictionally or structurally unemployed. However, cyclical unemployment only happens when an economy is in a downturn. Cyclical unemployment signifies a decrease in the GDP. Unemployment produces many unpleasant effects. Unemployment affects not only the unemployed but also society as a whole. These effects can be monetary and social. Overcoming certain barriers to job creation can help reduce frictional and structural unemployment. However, cyclical unemployment requires government intervention. Most economists believe that aggregate demand must increase to get back to full employment. Using Keynesian economics, government spending must increase to shift the demand curve to the right, which causes employment to rise. Overall, any type of unemployment is an issue but there are ways to reduce the unemployment rates and keep our economy at least close to full employment thus reducing the unpleasant effects of unemployment.
Labor Force First, to understand unemployment, we must understand the three different categories in the labor force: employed, unemployed, and not in the labor force. Employed is a person whom has held a job within the last week or held a job but out due to a strike or illness. Unemployed is a person who has not worked in the previous week but has attempted to find work in the last month. Not in the labor force is a person whom does not fall in the categories above. This category includes non-working spouses, students, and


References: Encyclopedia Britannica. (2012). Unemployment. Retrieved December 14, from http://www.britannica.com/EBchecked/topic/614368/unemployment Fink, S Tim. (2011, April 26). Three types of unemployment. Retrieved December 15, from http://www.faithandfinance.org/2011/04/3-types-of-unemployment-and-what-they-mean/ Tucker, I 8,000 Actual and Potential GDP, 1980- 2012
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