The Causes Of Unemployment Essay

2779 words - 12 pages

The Causes of Unemployment
According to the Keynesian economic theory, unemployment results from insufficient effective demand for goods and services in an economy. Some believe that structural problems and inefficiencies in the labor market cause unemployment. Others believe that regulations like minimum wage laws imposed on the labor market lead to unemployment. Some thinkers believe that unemployment is a result of the law of demand and supply not being applied in case of employing people. A decline in the demand for products or services of a company does not result in the decrease in wages of the company employees. And this may strike an imbalance in the economy. The causes of ...view middle of the document...

Structural unemployment exists where there is a ‘mismatch’ between their skills and the requirements of the new job opportunities.
Skills are required to cope with structural changes in output and employment
Structural change is a constant feature of a flexible economy. As some sectors decline, so other sectors – requiring different skills – will expand. The pace of technological change and global integration will increase demand for a more highly skilled workforce with the ability to adapt to changing technologies and shifting product demand.
Source: HM Treasury, the Benefits of a Flexible Economy, April 2004
Many of the unemployed from coal, steel and heavy engineering have found it difficult to gain re-employment without re-training. This problem is one of the occupational immobility of labour. The long-term decline in industrial employment has continued (a process known as deindustrialisation) and there has been a huge shift into service-based employment, especially in banking, finance and insurance, other business services and distribution, hotels and restaurants.

The labour market has very few job creation possibilities whereas new entrants to the
Workforces continue to pour in, driven by strong demographic growth. The types of work
Vary widely from country to country. However, in Burkina Faso, for example, where data
on employment distribution by branch of activity are available, over 84% of jobs are
provided by agriculture, but these are generally in the form of self-employment in a
family establishment (INSD, 2003). In rural areas, whole families engage in subsistence
farming without any technical or financial resources that could help them increase their
productivity significantly. As a result, jobs created in agriculture are limited to a few
salary jobs in state structures such as government-owned agricultural concerns (ex. seed
centres), or in a few rare large-scale agricultural farms. In the majority of West African
countries, a great number of salary workers are employed by the State, local authorities
and para-public enterprises. The numbers of other salary workers, employed by the private
sector, are fewer or greater depending on the country’s level of industrialisation and the
importance of the tertiary sector.
39. In the WAEMU countries as a whole, the public administration provides 7.5% of jobs
while the private sector employs around 15% of economically active persons (INSEE et
al., 2005). The remaining workers, who account for the largest number of jobs, consist of
the self-employed, often poorly paid, or those in unpaid family employment. The
informal private sector (self-employment and underemployment) remains the largest
employer with 76.4% of the workforce. This configuration varies from country to country,
but the trend is fundamentally the same: employment distribution in the Capital Cities of
WAEMU is dominated by the informal sector, which provides between 71.1% (the case of

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