Causes and Effects of Unemployment

Causes of Unemployment

Financial Problems- When an individual faces financial problems when trying to start up a business or keeping the business in motion, things will collapse causing the individual to lose his job or hope for work. How can one start a business without initial capital? When there are no business, there are no jobs for numerous people.

Emotional/Personal Problems- When individuals are going through rough days or rough times with their family and (or) personal lives, they usually tend to break focus from their work and produce bad results. This causes workers to get fired and lose jobs hence leaving people stranded without jobs.

Effects of Unemployment

Lost of Outputs of Goods and Services- Unemployment wastes the marginal resources that can be used to produce an extra unit of goods or services. The hours that unemployed people don't work causes huge losses to the firms.

Fiscal Costs to the Government- As people become unemployed,  the government is forced to collect higher taxes and revenues to account for their needs. This increases taxation, government expenditure and causes the government to collect money from the people and use it to fix unemployment instead of using it for something else to build infrastructure and other national items.

Dead Weight Loss Investment in Human Capital- Workers who are unemployed lose their skill over long periods of time. This reduces their chance of getting employment later as their skill would have deteriorated forcing them to live their future deskilled and unemployed.