CAUSES AND

EFFECTS OF
UNEMPLOYMENT
PROBLEMS
WHAT IS UNEMPLOYMENT?
• Unemployment is an economic condition in which individuals actively seeking jobs remain un-
hired. The problem of unemployment is a world-wide reality; the developed countries as well
as the developing countries suffer from it. With the passage of time it has become worse
especially after the global economic crisis, and it has become a threat to social development,
whilst consideration must be given to global economics.
• The term unemployment is used to describe anyone who is able to work, but doesn’t have an
occupation. Unemployment is one of the most common and chronic problems worldwide. It is
a concern for individuals as well as global communities. Unemployment is expressed as
percentage of the total available work force that is unemployed, but actively seeking
employment and willing to work which is known as the unemployment rate.
• Individuals who are unemployed are often more susceptible to several challenges, including
difficulty in finding future employment and decreased income. Unemployment also impacts
society and the economy as a whole. The longer a person is unemployed, the more likely they
are to experience potential negative effects and contribute to the multiplier effect that
unemployment has on the community. 
CAUSES:
• The following are the main causes of unemployment:

(i) Caste System:

In India caste system is prevalent. The work is prohibited for specific castes in some areas. In many cases,
the work is not given to the deserving candidates but given to the person belonging to a particular
community. So this gives rise to unemployment.

(ii) Slow Economic Growth:

Indian economy is underdeveloped and role of economic growth is very slow. This slow growth fails to
provide enough unemployment opportunities to the increasing population.

(iii) Increase in Population:

Constant increase in population has been a big problem in India. It is one of the main causes of
unemployment. The rate of unemployment is 11.1% in 10th Plan.
• (iv) Agriculture is a Seasonal Occupation:

Agriculture is underdeveloped in India. It provides seasonal employment. Large part of population is dependent on
agriculture. But agriculture being seasonal provides work for a few months. So this gives rise to unemployment.

• (v) Joint Family System:

In big families having big business, many such persons will be available who do not do any work and depend on the
joint income of the family. Many of them seem to be working but they do not add anything to production.

(vii) Slow Growth of Industrialisation

The rate of industrial growth is slow. Though emphasis is laid on industrialisation yet the avenues of employment
created by industrialisation are very few

• viii) Less Savings and Investment:

There is inadequate capital in India. Above all, this capital has been judiciously invested. Investment depends on
savings. Savings are inadequate. Due to shortage of savings and investment, opportunities of employment have not
been created.
• (ix) Causes of Under Employment:

Inadequate availability of means of production is the main cause of under employment. People do not get employment for
the whole year due to shortage of electricity, coal and raw materials.
• (x) Defective Planning:

Defective planning is the one of the cause of unemployment. There is wide gap between supply and demand for labour. No
Plan had formulated any long term scheme for removal of unemployment.

(xi) Expansion of Universities:

The number of universities has increased manifold There are 385 universities. As a result of this educated unemployment or
white collar unemployment has increased.

•  (xii) Inadequate Irrigation Facilities:

Due to lack of irrigation, large area of land can grow only one crop in a year. Farmers remain unemployed for most time of
the year.

(xii) Immobility of labour

Mobility of labour in India is low. Due to attachment to the family, people do not go to far off areas for jobs. Factors like
language, religion, and climate are also responsible for low mobility, Immobility of labour adds to unemployment.
EFFECTS:
• When unemployment rates are high and steady, there are negative impacts on the long-run
economic growth. Unemployment wastes resources, generates redistributive pressures and
distortions, increases poverty, limits labor mobility, and promotes social unrest and conflict.
The effects of unemployment can be broken down into three types:

INDIVIDUAL

SOCIAL

SOCIO POLITICAL
.

• Individual: people who are unemployed cannot earn money to meet their financial obligations.
Unemployment can lead to homelessness, illness, and mental stress. It can also cause
underemployment where workers take on jobs that are below their skill level. Common
disadvantages of unemployment for individuals include: Reduced income, Health problems,
Negative familial effects, Mental health challenges.
• Social: an economy that has high unemployment is not using all of its resources efficiently,
specifically labor. When individuals accept employment below their skill level the economies
efficiency is reduced further. Workers lose skills which causes a loss of human capital.
Communities with high unemployment rates are more likely to have limited employment
opportunities, low-quality housing, fewer available recreational activities, limited access to
public transportation and public services and underfunded schools.
• Socio-political: high unemployment rates can cause civil unrest in a country. Unemployed
persons also experience a reduced purchasing power which can leave other individuals who
create products that were purchased by these individuals without jobs as well. Unemployed
individuals consume much less than those who are employed, so a higher unemployment rate
can leave the economy lacking in terms of products sold. This can leave organizations with
decreased revenue.
THANK YOU