Causes of Unemployment

Unemployment is one of the important problems of the nation states which is haunting the minds of the planners and policy makers as well as the leaders of the national and state governments. Many factors are responsible for rising unemployment problems in the nation states. Some of the important causes of unemployment are narrated below.

i) Population Growth: One of the most important causes of unemployment in India is the population growth. High population growth is adding to the youth population above the age 15+ which is increasing in the geometric proportion, while the number of employment is growing at arithmetic proportion. There is a huge gap between the availability of employment and employment seekers particularly in the developing countries. Population
growth is one of the leading causes of unemployment.

ii) Low capital formation: Most of the developing countries are capital poor countries. Income of the gigantic percentage of population is very low; resulting in low saving, consequently low investment. Moreover, investment and job creation in the private sector is also low. Creeping inflation has raised the expenditure and reduce the saving mostly in case of the middle and lower middle class of population resulting in poor investment in
individual and small and middle entrepreneurial activities.

iii) Informal sector: Most of the employment in the developing countries is informal employment. A large percentage of population are working in the unorganized sector where the income is low and the there is no job security. Therefore, most of the workers working in the informal sector consider themselves to be unemployed.

iv) Slow industrial growth rate: Industrialization creates employment and that to sustainable employment. Country where the industrialization process is slow has larger percentage of population found to be unemployed as compared to those where the industrialization is fairly faster. Industrialization leads to urbanization and thus enhances the scope of employment in the Unemployment economy.

v) Jobless service sector: In the developing countries in particular, the contribution of service sector to employment is quite dismal as compared to the developed countries. In the developed countries have the service sector contributes more than 70 percent to their GDP and also in the same vein obsorved more than 70 percent of labour force in it. As far as India is concerned, the contribution of service sector to GDP is more than 58 percent,
however, it employees only 27 percent of labour force in it. Therefore, joblessness in service sector is also a cause of unemployment.

vi) Slow structural changes: Structural changes are very slow in the developing countries leading to presence of disguised unemployment in the agriculture sector in these countries. This is due to slow industrialization and urbanization in the developing countries. The disguised unemployed are burden on the family and also on the agriculture sector. They are deliberate burden on the family and the economy. Moreover, because of slow urbanization and industrialization there is slow pace of structural changes particularly in the developing countries. This is one reasons for unemployment particularly in the developing countries.

vii) Higher salary: Higher salary in public sector has reduced jobs in the public sector: It is observed that a high scale in the public sector after implementation of 6th pay commission many state governments in India have reduced employment in the public sector. Low salary and check on inflation can create more jobs in the economy rather than high salary and high inflation.

viii) Faulty education system: There is lack of quality education both general as well as technical education in the developing countries. Several studies have shown that a large percentage of technical graduates in India are not fit for employment. The education system in the developing countries is very poor as compared to the developed countries. The low quality of education is a responsible factor for unemployment. Quality education has a strong relationship with the employment.

ix) Poor implementation of employment progarmmes: Many developing countries have launched many employment programmes for the rural and urban areas unemployed. However, these employment programmes are in piece meals have miserably failed to upflit the people from the specter of unemployment. Moreover, many self employment programmes have not ensured better income to the self employed persons.

x) Migration: The migration of people from the rural to urban areas is one of the main causes of urban unemployment. Further, migration of less qualified and unskilled  population from rural areas to urban areas has created a layer of underemployed workforce in the urban areas. Their quality of living is very poor and most of them are living in the unorganized colonies.

xi) Private Sector role is not strong: Many developing countries private sector is not plying important role in generation of employment. Moreover, because of rules and regulations many entrepreneurs are not encouraged to invest in the developing countries. Besides, the private sector job in many cases lacks job security and other benefits. They also exploit by paying low salaries and wage rate.

xii) Informal sector: In developing countries more than 90 percent of people are found to be employed in the informal sector. Here the working hour is more and the wage rate is low. Informal sector is responsible for creating more underemployment rather than employment in these countries.