What are the leading causes, effects and solutions of the unemployment in economy and society?

Course: Social Problems of Pakistan (SOC-415)

Course Instructor: Saeed Mashaal Bhatti

saeed.mashaal@uog.edu.pk

Unemployment refers to the total number of people who do not have jobs in a particular place or area. Unemployment occurs when people are without work and actively seeking work. Socialism refers to an economic system characterized by state ownership of the means of production and distribution of goods and services. Capitalism is an economic system characterized by private ownership of the means of production and distribution of goods and services for profit in a competitive market. Industrialization is the replacement of hand tools, human labor, and animal labor with machines run by steam, gasoline, and electric power. Post-industrialization refers to the shift from an industrial economy dominated by manufacturing jobs to an economy dominated by service-oriented, information-intensive occupations.

CLASSIFICATIONS OF UNEMPLOYMENT

1.                  Structural unemployment focuses on the structural problems within an economy and inefficiencies in labor markets.

2.                  Frictional unemployment is the time period between jobs when a worker is searching for or transitioning from one job to another.

3.                  Cyclical unemployment is a type of unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.

4.                  Classical unemployment occurs when real wages for jobs are set above the marketing clearing level.

5.                  The natural unemployment rate represents the hypothetical unemployment rate that is consistent with aggregate production being at a long-run level.

HOW TO SOCIAL PROBLEM

When large numbers of people are unemployed, it has widespread economic and social effects. Hunger and homelessness are considered social problems. If you can't feed your family, or pay your rent, you need help. Social service agencies are set up to provide help and relief for people in these situations; unemployment is therefore a social problem.

CHARACTERISTICS OF UNEMPLOYMENT

Unemployment is bad. Obviously long-term unemployment is worse. But it's not just a little worse, it's horrifically worse.

1.                  Its way higher than it's ever been before. When the headline unemployment rate peaked in 2010, it was actually a bit lower than the peak during the 1980 recession and only a point higher than the 1973 recession. As bad as it was, it was something we'd faced before. But the long-term unemployment rate is a whole different story. It peaked at a rate nearly double the worst we'd ever seen in the past, and it's been coming down only slowly ever since.

2.                  It’s widespread. There's a common belief that long-term unemployment mostly affects older workers and only in certain industries. In fact, with the exception of the construction industry, which was hurt especially badly during the 2007-08 recession, "the long-term unemployed are fairly evenly distributed across the age and industry spectrum."

3.                  Obviously long-term unemployment produces a sharp loss of income, with all the stress that entails. But it does more. It produces deep distress, worse mental and physical health, higher mortality rates, hampers children’s educational progress, and lowers their future earnings.

4.                  It's long-lasting. "job loss has consequences that linger even after people return to work. Finding a job, on average, recovers only about two thirds of the initial harm of losing a job.

5.                  It dramatically reduces the prospect of getting another job.  recent research suggests that this attitude has become even worse in the current weak economy. Rand Grayed, a visiting scholar at the Boston Fed, sent out a bunch of fictitious resumes for 600 job openings. Each batch of resumes was slightly different (industry experience, job switching history, etc.), and all of these things had a small effect on the chance of getting a callback. Effect: being unemployed for six months or more. If you were one of the long-term unemployed, it was all but impossible to even get considered for a job opening.

6.                  It turns cyclical unemployment into structural unemployment. What we've mostly had during the Great Recession and the subsequent recovery has been cyclical unemployment. This is unemployment caused by a simple lack of demand, and it goes away when the economy picks up. But structural unemployment is worse: it's caused by a mismatch between the skills employers want and the skills workers have.

7.                  It hurts the economy.  IMF research conference, concludes that "by tolerating high unemployment we have inflicted huge damage on our long-run prospects." How much? The authors suggest that not only has it cut GDP growth, it's even cut potential GDP growth. They estimate the damage at about 7 percent per year—which represents a loss of roughly $3,000 for every man, woman, and child in the country.

CAUSES OF UNEMPLOYMENT

1.                  Growth of Population: One of the major problems regarding unemployment in Pakistan is uncontrolled growth of population. The population of Pakistan is increasing at very high rate this time. According to the statistical, the population of Pakistan is increasing at the rate of 2.2%. There are plenty of factors responsible for over population such as early marriages, illiteracy, desires for sons, lack of awareness etc.

2.                  Poor Education System: The education system in Pakistan has been really poor since the creation of Pakistan. Unfortunately any government since independence didn’t take especial steps to make the education system batter. Education system in Pakistan is unbalanced. It has been seen even talented students left study due to injustice of system. You will observe many technical educational colleges and private technical institutions are being found which are only selling degrees because technical education which is being given in these institutions has no value, therefore people are wondering about for jobs due to lack of experience and  skills.

3.                  Violence and Terror Activities: As we all know very well that the Karachi is hub of trade and business in Pakistan but there are no rules and regulations in Karachi as everyone is violating law in the biggest city of Pakistan. The peace of Karachi has been destroyed. The hidden internal and external elements do not want to see Karachi prosperous. Furthermore, Pakistan having very bad time at the moment due to uncontrollable terrorism. Another cause of unemployment is terrorism. Terrorist activities in Pakistan are on peak at present especially in Karachi, therefore situation in Karachi is really threatening and alarming and due to this the nationals and as well as foreigners are frightened to invest in Pakistan.

4.                  Energy Crisis: There are many sources of producing of energy in Pakistan but due to lack of proper planning and efforts Pakistan is having problem of energy crisis. The government of Pakistan is unable to provide electricity to residential areas in Pakistan than how can energy or electricity can be provided to factories and industries. Therefore factories and industries that are required energy are transferring their business in other Asian countries like Bangladesh, India and as well as Sri Lanka. As of this result a huge number of labors are becoming the victims of unemployment.

5.                  High Age of Retirement: The age of retirement in Pakistan is 60 years and it is really high age of retirement and the government of Pakistan is directly responsible for this factor. There are various educated people are in wait of jobs but high age of retirement is making young ones frustrated.

6.                  Afghans Refugees: Afghans refugee to Pakistan is the additional problem of unemployment in Pakistan.  When American army attacked on Afghanistan in 2001 about 13 years ago and due to this plenty of Afghans migrated to Pakistan for making them save till the betterment situation of their country but the situation in Afghanistan is still critical. The migrated people caused labor markets as they are ready to work for fewer wages.

CONSEQUENCES OF UNEMPLOYMENT

Effects of unemployment on economy

1.      Unemployment financial costs: The government and the nation suffer. In many countries the government has to pay the unemployed some benefits. The greater the number of the unemployed or the longer they are without work the more money the government has to shell out. Therefore, the nation not only has to deal with the lost income and decreased production but also with additional cost.

2.      Spending power: The spending power of an unemployed person and his/her family decreases drastically and they would rather save than spend their money, which in turn affects the economy adversely.

3.      Reduced spending power of the employed: Increased taxes and the insecurity about their own work may affect the spending power of the working people as well and they too may start to spend less than before thus affecting the economy and also the society in a negative manner.

4.      Recession: With the increase rates of unemployment other economy factors are significantly affected, such as: the income per person, health costs, quality of health-care, standard of leaving and poverty.

The effect of unemployment on society

Unemployment affects not just the person himself but also his/her family and in the long run the society where he lives. Unemployment brings with it despair, unhappiness and anguish. It forces people to live their lives in a way they do not wish to – The life expectancy is negatively affected. Life expectancy is the ease by which people living in a time/place are able to satisfy their needs/wants. Here are the main aspects:

1.      Mental health problems like: Law self-confidence, feeling unworthy, depression and hopelessness. With the lost income and the frustration involved in it, the recently unemployed may develop negative attitudes toward common things in life and may feel that all sense of purpose is lost. Frequent emotions could be – low self-esteem, inadequateness and feeling dejected and hopeless.

2.      Health diseases: The unemployment overall tension can increase dramatically general health issues of individuals.

3.      Domestic and political issues: Quarrels and arguments at home front which may lead to tension and increased numbers of divorces etc. Loss of trust in administration and the government which may lead to political instability

4.      Tension over taxes rise: Unemployment also brings up discontent and frustration amongst the tax paying citizens. In order to meet the demands of the unemployment fund the government many a times may have to increase the taxes thus giving way to restlessness amongst the tax paying citizens.

5.      Insecurity amongst employees: The prevailing unemployment and the plight of the unemployed people and their families may create fear and insecurity even in the currently employed people.

6.      Crime and violence: Increase in the rate of crime.

7.      Stigma: Unemployment brings with more than just ‘no work’. It also brings with it the disgrace that the person has to bear. Nobody likes to be termed as unemployed.

8.      Standard of leaving: In times of unemployment the competition for jobs and the negotiation power of the individual decreases and thus also the living standard of people with the salaries packages and income reduced.

9.      Employment gaps: To further complicate the situation the longer the individual is out of job the more difficult it becomes to find one. Employers find employment gasps as a negative aspect. No one wants to hire a person who has been out of work for some time even when there’s no fault of the individual per say.

10.  Lose of skills’ usage: The unemployed is not able to put his/her skills to use. And in a situation where it goes on for too long the person may have to lose some of his/her skills.

SOLUTION OF UNEMPLOYMENT IN PAKISTAN

It will be tough ask for government to solve one of the major problems of Pakistan “Unemployment” due to huge population but still we have given some solutions to reduce the unemployment in Pakistan and we are hopeful by following these solutions the ratio of unemployment in Pakistan can be reduced or decreased.

1.      Planning and management: The first thing to do to reduce unemployment in Pakistan is the proper planning by the government of Pakistan.

2.      Improving education system: The education system of Pakistan should be equal and well managed.

3.      Skills and training: Well recognized training and technical institutions are need to be established where skills programs are offered.

4.      Stabilizing Energy crisis: Remove energy crisis so that investor comes to Pakistan thus job placement will automatically be created.

5.      Law and order situation: There should be peace across the country so foreigners will not hesitate to invest in Pakistan.

6.      Grooming agricultural sector: The agriculture sector should be developed.

7.      Meritocracy in the employment: Jobs should be given purely on merits.

8.      Attracting foreign companies: Encourage multinational companies to business in Pakistan.

9.      Family panning: Family planning centers should be opened to control the flow of over population.