What is unemployment

What is unemployment? Causes, effects, and solutions

Unemployment can be defined as the situation when a person is not studying and is not working. This person is generally between 15 years old and 64 years old. This person is neither working part-time nor as a freelancer. This person is also actively looking for work.

An important indicator of how well an economy is doing is low unemployment.

In this article, I will briefly show some of the possible causes of unemployment, its effects, and possible solutions.

Unemployed people can also search for a job through various apps and websites in all countries.

What is unemployment? Causes, effects, and solutions

Unemployment usually is defined as the situation when a person is not studying and is not working. Depending on the country, this person is between 15 and 64. This person is not working part-time, and they are not working as a freelancer. This same person is also actively looking for work.
Unemployment is all people in a country actively looking for work but can’t find one.

What are the causes of unemployment? 

Causes of employment can roughly match different types of unemployment as follows.

Structural unemployment

Issues in the economy or the labor market can cause structural unemployment.
Little demand for nurses, for example, can cause unemployment among nurses. That can cause unemployment also among doctors or other medical staff. Or the favorite coffee shop of the nurses can close down. That is an issue in the labor market.
Technology changes cause structural unemployment. That is an issue in the economy.

Technology and automation

A technological change can diminish the role of humans in industrial processes. These industrial processes are, therefore, automated. Technology and automation can produce unemployment.

Institutional Unemployment

The government’s or other institutions’ policies can cause institutional unemployment.

Frictional unemployment

People moving from one job to another are the cause of frictional unemployment.

Cyclical unemployment

Low demand for goods and services causes cyclical unemployment. An example can be an economic recession.

Economic recession

Recessions lead to higher unemployment, reduced wages, and the loss of opportunities. Education, private capital, and economic growth are all likely to suffer. Economic recession can lead to a decline in living standards. Many people have little money or have been in debt for a long time.

What are the effects of unemployment? 

High unemployment increases economic inequality and harms economic growth.
Unemployment can damage productivity for many reasons.
Working people are productive. When they don’t work, the all economy is less effective.
Unemployed people start living on their savings. Therefore they become poorer.
It limits liquidity. Many people have no jobs, so less cash is around.
It restricts labor mobility.
It erodes self-esteem. That fosters social dislocation, instability, and conflict.

What are the solutions to unemployment? 

Societies are trying many measures to get as many people as possible into work. And for extended periods, different countries have experienced near-full employment.
Below is a list of some of the solutions governments have successfully applied to reduce unemployment directly.
This list doesn’t include systemic economic policies that are not directly related to cutting employment. For example, a successful policy against corruption in a country will improve its economy. Therefore a policy against corruption can indirectly decrease unemployment.

Managing innovation

Government policy can manage how technology changes increase unemployment.


The availability of affordable quality education is a solution for unemployment. People will seek further training, making them more likely to get employment.

Shorter working hours

Shorter working hours increase available work.

Public works

The government uses public projects as a way to create more employment.

Fiscal policies

The government uses fiscal policies as a way to create more employment.
For example, the government decreases taxes for employers who create jobs.

How to measure unemployment? 

The unemployment rate typically measures unemployment. The unemployment rate is the total number of the jobless population divided by the number of the workforce of a country.

Sources: Investopedia

The above cover image is a photo by Ehteshamul Haque Adit on Unsplash. It was taken somewhere in Bangladesh.