Unemployment

Table of Contents
Unemployment
Sr.# 1 2 3 4 5 Topics Preface Definitions & Causes of Unemployment Types of Unemployment Unemployment situation in Pakistan Role of the Government: Page. # 2 3 3 4 5

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Preface
This section of assignment includes on the topic of Unemployment, causes, types and its present situation in Pakistan. What the Government of Pakistan is doing for reducing the Unemployment.

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UNEMPLOYMENT Definition: Unemployment is the state of an individual looking for a paying job but not having one. Unemployment does not include full-time students, the retired, children, or those not actively looking for a paying job.
Unemployment is a phenomenon where a person is physically fit and qualified enough to take up a job but does not find it at the prevailing wage rate Causes of Unemployment

1. Number of graduates is increasing but we are unable to afford the avenue of work for this
growing number. 2. Number of industries is not increasing in Pakistan. Only few firms are introduced every year. Government should help the industrialists to start the business to reduce the rate of unemployment. Another cause of unemployment is that most entrepreneurs are untrained so often their business bankrupts and the number of unemployed persons is increased. Shortage of capital is an important cause of unemployment in the developing countries like Pakistan. Low saving lead to low investment which ultimately results in low capital formation. When rate of capital formation is low unemployment naturally prevails. Unemployment may also take place due to international economic depression, seasonal nature of certain jobs and structural changes in the economy which might take place with the process of growth and development in the country.

Types of Unemployment 1. Structural unemployment If there is less capital than the human resources who exist in the economy then this type takes place. 2. Frictional Unemployment This type takes place due to seasonal unemployment, abruptly low demand of consumer goods, low mobilization in labor, little knowledge about employment opportunities etc. 3. Cyclical Unemployment Cyclical unemployment occurs when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high. 4. Technological Unemployment

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Due to new and advanced improvements in industrial sectors unemployment can increase for example use of power looms traditional methods finished, mechanization in agriculture sector, and automatic plants and machinery in manufacturing.

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5. Voluntary Unemployment Sometimes labor unions protest for different purposes and they voluntarily close their work until their problems solved. So this type can be known as voluntary unemployment. 6. Disguised Unemployment This phenomenon occurs when persons employed thus contribute neither to the production of goods nor they render any type of meaningful services. The salary and other establishment expenditures incurred on such employees is a net burden on the national economy. In Pakistan disguised or hidden unemployment is mostly prevailing in agriculture sector.

Unemployment situation in Pakistan

Unemployment is a central problem because when unemployment is high, resources are wasted and people's incomes are depressed; during such periods, economic distress also spills over to affect people's emotions and family lives. Now we see that in Pakistan what is the situation of unemployment and what are its economic and social impacts.

Economic impacts
From Okun's law we know that for every 2% fall in GNP relative to potential GNP, the unemployment rate rises by 1% point. High unemployment is a symptom of waste for during recessions, when unemployment is high, the economy is not producing up to high level. When economy is not producing sufficiently, we can say that we are unable to use our full resources for production purposes. Economy will not grow as fast as it can if become able to produce at high level.

Social impacts
However large the cost to economy of unemployment, a recounting of Rupees lost does not adequately convey the human, social and psychological toll that periods of persistent involuntary unemployment bring. Although unemployment has plagued capitalism, the Industrial Revolution, understanding its causes and costs has been possible only with the rise of modern macroeconomic theory. It is apparent that recessions and the associated high unemployment are extremely costly to the economy. Unemployment is classified into three categories (a) Frictional unemployment (workers who are simply moving between jobs (b) structural unemployment (workers who are in regions or industries that are in persistent slump) (c) cyclical unemployment (workers who laid off when the overall economy suffers a downturn. In Pakistan unemployment is of structural and cyclical nature. Understanding the sources of unemployment has proved one of the major challenges of modern macroeconomics. Voluntary unemployment may be or when qualified people chose not to work out the going wage rate unemployment occur. The key element in understanding involuntary unemployment is the inflexibility of wages in the face of economic shocks. The same situation is in Pakistan, inflexibility arises because of costs involved in administering the compensation system. The upward creep in the natural rate arises mainly because of demographic trends particularly the higher proportion of teenagers in the labor force. In addition, government policies are also increasing unemployment rate i.e. Golden Shake Hand, ban on jobs increasing unemployment rate.

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Role of the Government:

1) Govt. should make efforts to push economic growth process. For this purpose Economic Revival Package should announce for the revival of industries sector, to stimulate production and investment. 2) Govt. should seriously try to boost exports through broadening the tax base and lowering tariffs. 3) Govt. should announce a package for the development of agriculture sector . 4) Beside this a number of fiscal and monetary measures should take to attract industrialists and particularly foreign investment. 5) More Technical and Vocational training facilities should be provided. In this way unemployed people will get the chance to enhance their skills and become able to earn reasonable income. 6) With a view to reduce educate unemployment; self-employment scheme should be encouraged in true manners.