Running head: Unemployment 1

The Causes and Effects of Unemployment

Camille Chapman
Strayer University
Prof. Julia Intawiwat
August 18, 2014

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The Causes and Effects of Unemployment
In this report I will give the major cause of unemployment. I will give information about the
second leading cause of unemployment. There are two other contributing causes on
unemployment; in addition. I will give three effects of unemployment on the economy. There are
three effects that unemployment has on people. This paper will give all the cause and effects of
unemployment have on everyone.
The major cause of unemployment is the economy. Small businesses and large corporations
do not have enough work for the workers, and then have to let them go. The more businesses fail
or lose money then the higher unemployment tends to be. People that do not have jobs, lose their
benefits. This is called natural unemployment. This means that a person is laid off, fired or quits
and is still looking for a job (Amadeo, 2014, para.1). Mr. Keynes stated that there are two types
of unemployment (Viner, 1936, p.148). The first kind is frictional unemployment. Frictional
unemployment relates to the inevitable loss of time between jobs, and presents difficulties
(Viner, 1936, p.148). Voluntary unemployment is defined as the unemployment due to the
refusal or inability of a unit of labor. The money wage offered must not below what the laborer
regards as a proper minimum rate of money wages. Unemployment would disappear if real
wages were to be reduced by a rise in the prices of wage-goods, money wages remaining the
same or rising in less proportion (Viner, 1936, p.148).
Unemployment can be caused by an advance in technology. Many computers and robots have
replaced workers in many companies. It is cheaper for companies not to have employees but
have robots and computers. They do not have to pay for benefits, if they have technology instead
of people (Amadeo, 2014, para.2). If workers are not retrained they may not have the skills
needed to get a new job this is called structural unemployment (Amadeo, 2014, para.2).
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Sometimes it is hard to retrain if some people are illiterate. It makes things harder when you do
not have the qualifications to get a new job. Most people cannot provide for their families
without employment. They need their retirement and their healthcare to survive. Many times this
leads to an increase of poverty
Unemployment can also be caused by outsourcing to other companies. These companies use
people from other countries to work for their companies. The companies pay less money and
little or no benefits to those employees. When companies moved their manufacturing or call
centers to another country this occurred after NAFTA was signed in 1994. China and India
gained the skills needed by American companies. This left many people without jobs and
benefits (Amadeo, 2014, para.3). Many people worked for these companies for years. My
grandmother worked for a shirt factory over 20 years that moved to China for cheaper labor.
Large scale unemployment is caused when consumer demand slows enough that businesses
lose too much profit. If they dont expect sales to pick up soon, they have to lay off workers
(Amadeo, 2014, para.4). In an economy that has reached a certain degree of development,
where capital is abundant and where the division of labor has been taken to great lengths , the
output therefore the real wage of the employed worker is not comparable to the unemployed
person catering to his own needs. When he is accustomed to a higher standard of living when he
is employed, losing his job the worker cannot always feed himself. This leads to the worker
needing help from the state. The United States has higher wages where unemployment is more
visible. France has lower wages where they have partial unemployment and underemployment
(Largentaye, 2013, p.7).
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The effects of unemployment are many. The first effect is mental health issues. The impact of
losing a job can cause depression. The second effect is self-esteem. Sometimes when coping with
the loss of a job impacts some people more than others. Job loss results in loss of self-esteem and
it can hurt the workers chances of finding new employment (Grayson, 2014, para.3). The third
effect that unemployment has on people is physical health. The study showed that displaced
workers got diseases such as, diabetes, heart disease and high blood pressure (Grayson, 2014,
para. 4). The last effect is family life. Relationships with spouses, children and friends tend to
change when a person is unemployed. Stress is the main cause of the family life issues.
In conclusion, unemployment causes and effects impact a person life in many ways. People
have to change their life and way of thinking after losing their job. Some have to be retrained to
obtain employment. Some people have to go back to school to get more education for a better
paying job. Unemployment play major role in people health. If they do not have benefits it can
cause more bills and lead to poverty. It is important to do all you can to improve yourself after
losing your job. It can take a major toll on you and the economy.

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References


Amadeo, Kimberly.(2014, August 19). What Causes Unemployment? Retrieved from
http://useconomy.about.com/u/ua/economicindicators/unemployment-survive.htm
Gryason, Lee. (2014, August 19). How Does Unemployment Affect People? Retrieved from
http://www.ehow.com/info_8437103_unemployment-affect-people.html.
Largentaye, Jean De. (2013). The Reef that Wrecks the Monetary Economy. International
Journal of Political Economy, 42, pp.6-12. DOI: 10.2753/IJPO891-1916420101.
Viner, J. (1936) Mr. Keynes On The Causes of Unemployment. Quarterly Journal of
Economics, 51(1), 147-167.









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