Unemployment Rise: Influential Factors and Economic Impact

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One of the most prevailing issues that surrounds our society and the industrial sector is the continuous rise in unemployment. The assessment of the poor performance of an economy affects the rise in unemployment rates which is assessed through the prevalence of unemployment and the percentage of the overall unemployed labor force and those who are still in the process of looking for work. According to Bassanini (2007), Duval (2007) and Ernst (2011) some of the factors and determinants that influences the rates on unemployment are the policies on minimum wages, increased tax burden and labor demand. The supply and demand side policies complement each other regarding unemployment because of the leniency and the if labor supply would increase …show more content…

Explanatory variables are essential in understanding the main drivers of structural unemployment and one of this is the NAIRU which stands for Non-Accelerating Inflation Rate of Unemployment which determines the institutional, economic and labor market structural factors that are affecting the unemployment rates. Findings show that higher labor market poses as one of the important sources of structural unemployment which points out the dynamics and the adaptiveness of the labor markets which drives the overall structural unemployment. In such cases, structural mismatch factors as stated by Otoiu (2012) and Titan (2012) on the other hand poses as the most influential factors of structural unemployment because of its correlation to the existing unemployment …show more content…

Inflation according to Pettinger (2014) links the increase in prices with unemployment because it discourages businesses to invest, creating the uncertainty and lowers the investment in turn there are lesser jobs created on the market. Recession is a temporary decline in the economic cycle leading to the reduction of industrial activity because of this it affects the business sector and consumer spending creating massive layback on the labor market thus workers are lay off from employment because of the losses. Business cycles are unpredictable when there is a contradiction in the economic perspective, businesses are dealt with reduced revenues leading to workers being lay

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