Unemployment exists if the number of people who are willing to work and seeking jobs exceeds the number of declared vacancies. That is, supply of labour exceeds demand for labour. Lord Beverage defined ‘full employment’ as ‘more Jobs than men’. Conversely, unemployment is “more men or applicants than available jobs”.
“Unemployment is a situation in which people who are legally qualified, willing to work and seeking jobs can’t secure gainful employment.’
Unemployment rate (UR)
It is a rate expressed as a percentage of the total labour force.
It is calculated as follows.
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.
An increase in the unemployment rate may be due to:
- Increase in the size of the labour force.
- Decrease in employment level.
Unemployment rate of about 2-5% in any society is a normal or good phenomenon (thing). It signifies a dynamic economy as such people are out of job on account of labour turnover (changing of jobs). Hence 95 – 98% of labour force being employed is termed as a full employment.
Types of Unemployment
The following are the major types of unemployment:
1) Seasonal unemployment.
2) Cyclical unemployment.
3) Frictional unemployment.
4) Residual unemployment.
5) Structural unemployment.
6) Technological unemployment.
7) Equilibrium unemployment.
8) Others: The following are the minor types of unemployment:
- Voluntary unemployment.
- Involuntary unemployment.
- Disguised unemployment.
- Casual unemployment.
- Search unemployment, etc.
1) Seasonal unemployment – caused by seasonal changes in demand for workers: It is an unemployment caused by seasonal changes in demand for workers. The demand for labour goes up and down in different seasons or periods. At a season or period when the demand for a firm’s goods or services is very low, e.g. rainy season, some of its workers may be laid off. Such retrenchment is called seasonal unemployment.
- Training: They should be trained to acquire more or additional skills so that they can secure another employment during the period when their services are not needed.
- Migration: They should move from areas with bad weather (areas with much rain) to areas or states with good or favourable climate (little or no rain) to secure work either temporarily or permanently.
2) Cyclical (mass) unemployment caused by economic recession – total fall in demand: Cyclical unemployment is an unemployment that arises from total fall for almost all goods and services due to severe economic slump – a period of economic recession. It is a period when there is an extremely low level of economic activities as a result of a drastic fall in demand for all goods and services.
- It is due to a great fall in the level of aggregate demand (i.e. a fall in demand for all goods and services).
- A great fall in almost all economic activities.
- Increase in total demand.
- Favourable government polices that bring about rapid recovery from economic depression e.g. increase in lending at low interest rate, etc.
- Migration: The retrenched workers should move from areas with great depression to areas with high level of economic activities.
3) Residual unemployment caused by unhealthy state of mind or body disability: In every society, there are pockets of people who are handicapped. They are not fit to work on account of either physical or mental disability. Many firms deem it imprudent (consider it unwise) to engage their services. And many governments don’t portray (show) serious concern either. Thus there exist perpetual pockets of unemployment of disabled people. The type of unemployment resulting from the above is called “Residual Unemployment”.
Proper training: They should be trained either by their parents, relatives or government to acquire appropriate or befitting skills which would enable them to be employed.
4) Frictional unemployment – Caused by “normal turnover of labour”: There is always a constant movement of labour (new work force) into and (old workers retiring) from the labour force as well as its movement between occupations, industries and states. And due to the time lag, a certain amount of labour is bound to remain unemployed for any given time. And unemployment arising from such movement and other economic frictions (distortion of economic activities) is called ‘frictional unemployment’.
(a) It is due to changing of jobs.
- Occupational mobility of labour – a teacher may voluntarily resign in order to search for better employment in the factories or in other industries).
- Geographical mobility of labour – a worker may tender resignation because of climatic factor – moving to a more conducive environment or in need of nearness to the home).
- Voluntary retirement from a place of work.
- Fresh graduates or new work force moving into the labour market seeking for jobs.
- Redundancy: Workers may be declared redundant (no more needed) due to either temporary or permanent close down of a firm.
- Economic Depression: Workers may be dismissed because of a great fall in demand for the firm’s goods or services.
- Migration: Unemployed people or terminated workers should move from the depressed areas (areas without jobs) to areas with economic boom (areas with a lot of vacancies).
- Workers should first and foremost secure (get) another job or receive letter of employment before resigning from their present places of work.
5) Structural Unemployment – caused by a change in process (method) of production due to a change in pattern of demand: Simply, it is caused by a change in the production process (a change in the technique or method of producing goods) due to a change in demand (a change in the type of goods which people or consumers wish to buy).
There is a change in demand (a change in the type of goods which people wish to buy) from pen to biro, egusi soup/garri to fried rice and salad, from bicycle to motor car/aeroplane, from typewriter to computer, from mud house to sky-scrapper (multistorey building), etc.
The technicians (workers) who produce pen, egusi soup/garri, bicycles, typewriter and mud house don’t have the skill to produce the new products (biro, fried rice/salad, motor cars/aeroplane, computer, sky-scrapper, etc) which are now in high demand. Therefore, old workers are retrenched (terminated) and they are replaced with the new technicians (new workers). The unemployment arising from this situation is called structural unemployment. Structural unemployment is, therefore, unemployment arising form change in the production process (technique of production) due to changes in pattern of demand (a change in taste and fashion).
- It is caused by a change in the production process due to a change in pattern of demand.
- It is caused by obsolete (outdated) skill or inability of workers to quickly acquire the new skills needed in modern factories.
- Immobility of labour – inability of labour (the retrenched workers) to migrate (move) from the depressed areas or areas in which their services are not needed to areas with economic boom or areas in which their services are needed.
Its remedial measures
- Training: The (old) workers should be trained to acquire the new skills (computer, civil and automobile techniques) needed in the factories. This can even be done through in-service training.
- Migration: The retrenched workers (those without jobs) should migrate (move) from areas in which their services are not needed to areas in which their services are needed.
6) Technological Unemployment caused by introduction of robots, automation or remote control in factories: Nowadays, production is carried out at a rapid rate in order to meet the increasing demand for goods and services. Thus manually operated machines and plants are now being replaced with remote-control plants. In other words, many organizations especially production firms are now introducing robots or automation into their factors for:
- the reduction of labour strength and cost.
- increasing rate of operation and productivity.
And the unemployment resulting from this introduction of automation in plants is called ‘Technological Unemployment’.
Its cure: Affected workers should move to areas or states in which their services or skills are needed.
7) Equilibrium unemployment: It occurs when the National Income is in equilibrium.
The national income is in equilibrium when “aggregate expenditure equals real national income”; and there is neither inflation nor deflation. Even at full employment or national income equilibrium, an insignificant (very small) amount of labour remains unemployed due to certain lapses, like labour turnover – frictional unemployment.
That is, when the economy is at full employment level, unemployment still occurs, but it is quite minimal, such as 2 – 4% of the size of the labour force. However, this rate varies from one country to another. And such an amount of unemployment that occurs when the economy (country) is at full employment level is called ‘equilibrium unemployment’.
The antonymous (opposite) concept is “Equilibrium Employment”. It is amount of employment that occurs when the national income is in equilibrium. It is estimated at 95-98% of the labour force; while the equilibrium unemployment is estimated at 2-5% of the labour force.
The following are the minors types of unemployment:
(a) Voluntary unemployment: It occurs when people deliberately withdraw their services due to unsatisfactory conditions of work, especially during industrial crisis or strike. It also arises from unwillingness to work.
(b) Involuntary unemployment: It occurs when the action of a certain group of people, like strike in major industry (oil firm), forces the subsidiary industries like contractors’ workers to become unemployed. If Texaco (Nigeria) Limited is temporarily closed due to industrial crisis, a contracting firm (Globestar Nig. Ltd) attached to or working in Texaco premises will also be affected. The unemployment in Texaco is voluntary while in Globestar is involuntary.
Similarly, if school is on long vacation, the catering firm (restaurant’s owner) inside the school will be involuntarily unemployed. This type of unemployment is called ‘involuntary unemployment’.
(c) Disguised unemployment: It mainly refers to under-employment. It occurs when people are not gainfully employed or fully engaged. That is, the work does not occupy their full time. This occurs mostly in the ministries. Some workers may only work for two or three hours, and they remain idle for the remaining six or five hours of the day. It implies that labour is not effectively utilized.
(d) Causal unemployment: This is a concept mostly applies to casual workers especially those of contracting firms and sea and airports (Ports Authorities). They don’t work on permanent basis but on casual (daily) basis. They are only paid for the days or period they work. Such workers remain unemployed whenever a contract is completed or ships and aircrafts are not at the ports.
(d) Search unemployment: It is due to failure (inability) of certain people, especially skilled or learned people, to secure desired employment or employment in their areas of specialization. Among those mostly affected are Engineers, doctors. Many medical personnel prefer remaining unemployed until they secure jobs in hospitals.
Causes of unemployment
- Lack of capital – inadequate number of industries: West African countries don’t have adequate capital with which to set up sufficient number of both medium and large-scale industries to absorb (employ) people with modern skills and graduates. This makes them to remain unemployed for indefinite (long) period.
- Over population: If a country’s population size is greater than optimum (the number of people is greater than the resources available), some of the people can’t secure jobs. They remain either under employed or unemployed.
- Poor social amenities: Lack of social amenities and large firms in rural areas compel the youths or school leavers to migrate to the urban centers to look for jobs. Due to lack of qualification or appropriate skills, they remain unemployed for an indefinite period.
- Seasonal factors: Some people remain unemployed in certain seasons or periods (months) of the year because of fluctuation in demand for their products or services. This may be due to a change in weather, end of contract, etc.
- Excessive rural-urban migration: In developing countries, there is constant massive influx (movement of a large number) of rural dwellers to urban centers (cities) to seek for jobs. This increases the rate of unemployment as many of them can’t secure job immediately.
- Faulty educational system: In many African states, the educational system is faulty. It does not enable students to acquire modern skills or technology to enable them excel (perform well) in different economic sectors. Thus they can not be employed in industries.
- High minimum wage rate: If the minimum wage rate is extremely high, like N30,000 to N80,000 monthly, many employers will retrench their workers because of inability to pay them. This increases the number of unemployed people.
- Inadequate government incentives: Governments in West Africa are not making much effort to resolve our unemployment problems. They don’t create enabling environment for applicants to be easily absorbed (employed). For instance, granting of soft loans – interest free loans to applicants will enable them to be self employed as they will use them to set up small scale enterprises.
- Immobility of labour: A large number of applicants (unemployed people) are quite reluctant to move from one place to another to seek for jobs. This may be due to lack of money for constant movement or reliable information about where vacancies exist. This makes them to remain unemployed for a long time.
- Adoption of capital intensive technique of production: Many industries now adopt capital intensive technique of production. This reduces the number of workers in the factories. For instance, the use of ATM (Automated Teller Machines) in banks reduces number of workers (cashiers).
- Economic recession – demand deficiency: A severe economic recession (total fall in demand of almost all goods and services) over, a long period of time may lead to retrenchment of workers. It also restrains (prevents) employment of new workers. This causes a rise in the level of unemployment.
- High cost and long period of training: A very high cost of acquiring high qualifications and a long period of training required to obtain a skill or certain qualifications, e.g. degrees discourage many people from working hard to get them. This makes them to be unqualified to fill vacancies. This leads to unemployment.
- Lack of modern (required) skills or appropriate qualifications: Retrenchment mostly affects workers with outdated skills. And people with outdated (old) skills or very low qualifications remain unemployed until they acquire modern skills or have higher qualifications, e.g. HND, degrees, needed in modern industries.
- Change in technology: A change in technique of production, especially from old method involving the use of old machine, e.g. typewriter, to new method involving the use of modern machine, e.g. computer, leads to retrenchment of workers with old skills. This leads to unemployment.
- Residual problem: Some groups of people remain unemployed indefinitely on account of disability either physical (body) or mental (mind) body. They include the blinds, deaf, cripples, etc.
Effects of unemployment
- Low standard of living – poverty: It brings about little or no income. And this leads to poverty, severe hardship, much suffering and a fall in the standard of living.
- High burden of dependents: It increases amount of unemployment allowances to applicants. It may lead to budget deficit.
- High crime rate: It leads to high crime wave, like armed robbery, cheating, forgery and other social vices like prostitution. They cause insecurity of lives and property.
- Low level of demand: A high level of unemployment affecting a large proportion of the labour force reduces effective demands for goods and services. This lowers the level of output of goods and services in a country.
- Under employment: It compels graduates and doctors to involve in menial (poorly paid) jobs, like bush clearing, gutter cleaning, serving in restaurants, etc. This discourages youths “from vigorously pursuing education.
- High rate of emigration – brain drain: It compels skilled labour to migrate to other countries in search of greener pasture (better jobs). Thus they are not available at the time their services are needed. This leads to acute shortage of certain skilled labour, especially medical doctors and engineers.
- Low national output and meagre per capita income: A large number of unemployed people in a country lowers the national output (total quantity of goods produced in a country) due to their inability to contribute their quota to the national product. And it leads to a fall in per capita income. bon
- Low level of saving and investment: Absence of employment makes level of saving to be quite low or fall to zero. And inability to obtain loan or credit facilities causes a fall in the level of investment.
- Threat to peace and stability – insecurity: It leads to insecurity of lives and property in a state as the unemployed people may be compelled to involve in various forms of terrible crime.
Measures to eliminate unemployment
In less developed countries, the following measures may reduce unemployment rate:
- Establishment of large scale enterprises: The government should set up very large enterprises, like Iron & Steel Complex, Petrochemical factory and other labour-intensive industries to absorb (employ) the surplus work force (unemployed labour) in the society.
- Encouraging mobility of labour (applicants): The government should encourage constant mobility of applicants throughout the country, even into other countries preferably by subsidising their cost of transport. This enables them to move to areas where there is demand for labour or demand for their skills.
- Training programme for adults or applicants: Government should create appropriate measures for labour to be self-employed. This can be done by setting up workshops in every state to effectively train unemployed labour to acquire appropriate or needed skills within 3-12 months. And loanable funds (capital) either in cash or fixed assets like machines or both should be given to them to set up small-scale enterprises.
- Formal education – high level of education: Government should create abundant educational opportunities for infants and adults to receive adequate training both in technical skills and formal education. A high level of ?ducation enables labour to be easily absorbed (employed) anywhere in the world.
- Registration of applicants: Government should create avenue for unemployed labour to register their services for employment. This can be achieved by setting up labour offices in all big cities and in local government headquarters.
- Dissemination of information: Information about job opportunities should be disseminated (sent) through mass media. In other words, available vacancies should be made known to everybody.
- Raising aggregate demand: Government should stimulate aggregate demand through appropriate monetary and fiscal policies. That is, government should create measures (make things possible) for people to be able to buy goods. This raises the level of investment in all the economic sectors as there will be a high demand for goods and services. Thus there will be high demand for labour. And it has the effect of reducing the unemployment rate.
- On-the-job training programme: Government should involve all workers with obsolete skills on training programme so that whenever they are out of job they can easily be absorbed. Also government should set up special workshops or disabled schools to train all people with disabilities to acquire special skills. This will reduce the size of residual unemployment.
- Labour-intensive industry: The adoption of labour intensive techniques of production (i.e. establishment of labour-intensive industries) greatly reduces the rate of unemployment” in a country.
- Development of rural areas: The rural areas should be properly developed with both industries and basic amenities. Both medium and large scale labour intensive industries should be established in rural areas. Secondly, almost all rural areas should be developed with adequate basic amenities e.g. good roads, constant supply of power. and potable water, tertiary institutions, cinemas or video houses, recreational facilities; transport buses, housing estate, postal and telecommunication facilities, modern market, etc. These make the rural areas to be quite attractive to the youths. They can: therefore settle down and be properly involved in any form of business units.
- Population control: Government should effectively control population: growth rate by advising people to imbibe the culture of small family size (birth control). This reduces the level of unemployment in the long run (in future).
- Favourable government policy: Government expansionist monetary and fiscal policies like decrease in taxes and interest rate, increase in expenditure (budget deficit) raises level of demand and economic activities. It raises level of employment.
- Introducing new educational system: Government should re-design educational system in favour of technical skills. Secondary school students (SSS1 to SSS3) should be involved in acquisition of technical skills that would enable them to be self-employed after leaving school.
- Provision of loans: Provision of soft loans to applicants makes them to be self-employed. It reduces level of unemployment
- Restricting trade union’s influence: Government, indeed all tiers of government, should curb (reduce) the influence or power of all trade unions so that they could not cause a rise in salary and wages. Their increase raises level of unemployment as employers can not pay them.
- Diversification: Much efforts should be made by the government to diversify the economy; i.e. to properly develop different economic sectors, e.g. industry, agriculture, mining, commerce, etc. This creates abundant employment opportunities in the country; and it leads to a fall in the level of unemployment.