Unemployment Concepts and Types

Unemployment

• Employment: A relationship between an employer and employee, usually based on a contract for paid work, including self-employed workers.
• Employed Person: Someone currently holding a job.
• Underemployment: When a person's employment doesn't match their skills, experience, or availability to work. Includes visible and invisible forms.
• Underemployed Person: Someone forced into low-paying, low-skill, or part-time work.
• Unemployment: A situation where a person is employable, actively searching for work but unable to find it.
• Unemployed Person: Someone without a job but actively looking for one.
• Unemployment as an economic indicator: High rates signal economic distress and lower economic output; extremely low rates suggest an overheated economy.
• Types of Unemployment:
  • Frictional: Workers transitioning between jobs, new graduates entering the workforce, or those relocating.
  • Cyclical: Occurs when available workers outnumber job vacancies, often due to economic contractions or slowdowns (like the COVID-19 pandemic).
  • Structural: Skills of workers don't match job requirements, a skills mismatch between available workers and required skills for available positions (e.g. clothing manufacturing).
  • Seasonal: Employment dependent on specific times of year, such as in agriculture or tourism.

Causes of Unemployment

• Lack of Job Opportunities: Insufficient job availability, often due to a lack of investment, economic recessions, complicated bureaucratic procedures for starting businesses and corrupt government practices. People may be forced to seek work overseas.
• Overpopulation/Oversupply of Graduates: The number of graduates may exceed job availability if high school and college education is universally accessible, leading to unemployment in some cases.
• Skills Mismatch: Workers' qualifications or skills do not meet job requirements. Education systems may not adequately prepare students for needed jobs, leading to underemployment.
• Lack of Comprehensive Long-Term Job Creation Plan: Poor planning and a mismatch between job market demands and worker skills, in turn hinders career growth within the labor force.

Effects of Unemployment

• Individual: Poverty, financial hardship, physical and mental health issues, reduced employability due to skill depreciation.
• Family: Higher incidence of school dropouts, strained family relationships, loss of support systems (e.g., if parents are OFWs).
• Society: Systemic and widespread poverty, homelessness, malnutrition, and a general sense of despair, anxiety, and dissatisfaction.

Solutions to Reduce Unemployment

• Improve and update formal education/vocational training: Provide relevant skills for the job market.
• Encourage entrepreneurship: Promote and support the creation of local jobs.
• Subsidies/incentives for companies: Encourage companies to create more jobs, especially during recessions.
• Fiscal/monetary measures: Boost job creation and labor demand, especially during recessions.

Globalization

• Globalization: The interconnectedness of countries, economies and cultures.
• Historical Developments: Silk Road, Age of Discovery, Industrial Revolution, Globalization 1.0, Globalization 2.0 and Globalization 3.0 (Information Age) leading up to the digital age.
• Factors: Trade routes, economic systems, communication technologies, and political factors that influence cross-border activity.
• Positive Effects: Spur economic growth, increasing competition, lower consumer price due to lower production costs, and increased job creation, particularly for developing countries.
• Negative Effects: Destabilized local markets, cultural homogenization, climate issues and labor disputes.