Week 1

UNEMPLOYMENT

Concept of Unemployment
Unemployment is defined as a situation in which persons of working
age, able and willing to work are unable to find paid employment. In
other words, unemployment refers to a situation in which people who
are capable of working and who are qualified by age to work cannot find
employment.
Unemployment rate is denoted by the symbol ‘U’ and is represented by
a formula below
U = Number of unemployed persons/Working population or labour force
× 100/1
Example
A country has a working population or labour force of 4.8 million of
which 3.6 million people are employed, calculate the unemployment
rate of the country.
Solution
Labour Force = 4.8 million
Number of employed = 3.6 million
Number of unemployed = 4.8 – 3.6 = 1.2 million
So, unemployment rate,U = Number of unemployed persons / Working
population or labour force × 100/1

U = 1.2 million/ 4.8 million × 100/1

U = 25%

Types of Unemployment

1. Structural unemployment: This is the type of unemployment which

arises as a result of changes in the pattern of demand of certain
commodity. If the demand is low, it could lead to industries reducing
their work force and this eventually results in structural unemployment.
2. Seasonal unemployment: This is the type of unemployment which
takes place in industries whose production is subject to seasonal
variations. In other words, there are certain seasons for production.
When such industries are off season, i.e not in production, very few
workers are required leading to unemployment.

3. Mass unemployment: Mass unemployment is the type of

unemployment which affects many occupations and industries at the
same time. It is caused as a result of decrease or fall in the quantity of
goods demanded. The industries so affected will embark on
retrenchment of workers leading to Unemployment. Mass
unemployment is also known as cycle or deficient unemployment.

4. Under employment: This is the type of unemployment which occurs

when an individual works at less than his full capacity so that his
productivity is below the maximum. Under-employment occurs when a
worker is not working in his full capacity.
5. Frictional unemployment: This is the type of unemployment which
occurs as a result of changes in the techniques of production. Due to
advancement in technology, machines are introduced in production,
which tend to replace labour and this can lead to retrenchment of
workers. Frictional unemployment is also called technological
unemployment.

6. Voluntary unemployment: Voluntary unemployment occurs when a

worker deliberately refuses to take up paid employment even though
employment opportunities are available, they may be receiving
unemployment benefits from the government, the available jobs may
not be attractive, etc.
7. Residual unemployment: This is the type of unemployment that
arises as a result of physical or mental disabilities. Those who are
disabled, and are not capable of working, fall into this group.
8. Casual unemployment: This is the type of unemployment which
involves jobs that are not permanent. This is common with the unskilled
type of labour, e.g. part time jobs.

Causes of unemployment

i. Inadequate educational system: The educational systems practised by

most developing countries are inadequate as special attention is paid to
paper qualification to the detriment of job creation.
ii. Lack of industrial growth: Most developing countries do not have
industries that are capable of employing enough workers. This leads to
unemployment.

iii. Over population: When a country’s population is too high, it tends to

produce many workers and such workers may not have jobs to do, there
leading to unemployment.
iv. Lack of social amenities: Labour tends to be unavailable when there
are no social amenities in the area.
v. Geographical mobility of labour: Due to certain circumstances,
labour find it difficult to move from one geographical area to another
and this results in unemployment.

vi. High cost of education: As a result of the high cost of acquiring

education, many find it difficult to go to school and so end up with low
paper qualification, which may not permit them to get good
employment.
vii. Use of automated machines: The use of automated machines in
factories reduces the need for many workers and this leads to
unemployment.
viii. Deficiency in demand: An overall fall in demand for goods can lead
companies to retrench workers.
ix. Poor development plans: Government does not normally put in place
development plans that can create employment opportunities or take
care of the unemployment.

Consequences of unemployment

i. Increase in crime rate: When there is a large number of unemployed

persons, it usually leads to increase in crime rate such as armed robbery,
car snatching, hired assassination, etc in a bid to survive.
ii. Threat to peace and stability: With an ever increasing number of
unemployed persons, the peace and stability of the state will be
threatened.

iii. Reduction in investment: The zeal to invest is always very low when
there is a high level of unemployment.
iv. Migration: When there is unemployment, it usually results in an
youths and adults alike moving out of the country to look for jobs in
other places.
v. Waste of human resources: The time, money and energy spent in
acquiring degrees and certificates will be wanted and labour is made
idle.

vi. High rate of dependency: The level of dependency will increase as a

result of unemployment.
Solutions to problems of unemployment
i. Industrialization: In terms of industrialization, Government should
establish many industries that can employ many workers.
ii. Population control: Population should be controlled to obtain
optimum level, so as to match the human population with available
natural resources.
iii. Encouraging geographical mobility of labour: The enabling
environment should be created so that labour should be able to move
from one geographical area to another.
iv. Provision of social amenities: The availability of social amenities does
encourage workers and this tends to reduce unemployment.
v. Incentives to potential investors: Potential investors should be
encouraged to set up industries that can absorb the unemployed.
Incentives like tax holidays, provision of social amenities, etc will
encourage investors to set up businesses that can employ workers.
vi. Proper development plans: Proper development plans should be put
in place to cater for the people who are unemployed.
Factors which influence the level of wages
1. Productivity: The higher the level of production, the higher the level
of wage and salaries, and vice verso.
2. Inflation: Inflation can induce employees to demand for increase in
the level of wages.
3. Rising income: The rising income in key sectors of the economy (e.g
the public sector) can lead to a general increase in wage limits. For
example, the federal government raised the minimum salary of federal
workers to #30,000 and all other employers too will have to adjust
wages and salaries.
4. Demand for and supply of labour: If the aggregate demand for labour
is low, there is the tendency for the level of wages to fall but if the
aggregate demand for labour is high, the level of wages would rise.
5. Effectiveness of trade unions: Activities of trade unions through
bargaining power can lead to increased wage level.
6. Technical changes: Technical changes such as Improved and more
effective process of production will lead to increase in productivity and
ultimately higher wage rates.
7. Quality of labour: The quality of labour in terms of skills or training
determines the level of wages or salary attracted. Highly educated and
professional workers attract higher level of wages than unskilled
workers.
8. Condition of the economy: When the economy is buoyant, workers
enjoy a high level of wages, but when the economy is in recession,
wages and salaries level fall.

Assignment

Take a quick test for this lesson!

1. Define unemployment.

2. State and explain the types of unemployment.

3. State the causes of unemployment.

4. What are the consequences of unemployment.