When a great many people are unable to find work, unemployment results.”

Calvin Coolidge, Politician

Unemployment: Causes, Effects & Solutions

causes, effects and solutions regarding unemployment

Unemployment can be defined as the state where people are out of jobs due to a variety of reasons.

There are several different types of unemployment, including macroeconomic as well as individual factors.

Unemployment can cause severe negative effects, not only for individuals but also for the overall economy.

In this article, the types, causes, effects and solutions for unemployment are shown in detail.

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Types of Unemployment

types of unemployment

Cyclical unemployment

Cyclical unemployment refers to a state where there are large swings in unemployment due to adverse economic conditions like recessions.

Although cyclical unemployment can have significant short-term effects on the local economy, in the long-term, the economy is likely to recover since cyclical unemployment often is just temporary.

Frictional unemployment

Frictional unemployment is the lack of employment due to factors like the search for a new job or due to the entering of the workforce of students after finishing college.

All this requires a certain amount of time, which implies temporary frictional unemployment.

Structural unemployment

Structural unemployment can be regarded as long-term unemployment due to a mismatch of demand and supply on the job market.

For instance, this could mean that unemployed people simply do not have the knowledge that is necessary to participate in the job market.

In our nowadays age, this could mean that people lack basic knowledge of how to use a computer, which makes it almost impossible to find an office job.

Regional unemployment

Another form of unemployment is regional unemployment.

It refers to a state where specific regions are structurally weak and just do not have many jobs to offer.

This may be due to unattractiveness for firms to open branches in those regions due to political instability or high corporate tax rates.

Thus, in those regions, unemployment rates are often quite high since there are simply not enough jobs.

Seasonal unemployment

Seasonal unemployment refers to unemployment that is due to seasonal factors.

For instance, some businesses make the majority of their sales in only a few months.

A good example is when companies supply goods for Christmas.

In the months before Christmas, sales usually skyrocket.

However, after Christmas, there are almost no sales at all.

Thus, especially in those kinds of businesses, seasonal unemployment is a big issue since companies simply do not need their workers anymore once the busy season is over.

Voluntary unemployment

There is also a fraction of people who actually do not want to work at all and want to enjoy their leisure time instead.

Those people contribute to the phenomenon that is often described as voluntary unemployment.

Causes of Unemployment

  1. Low level of education
  2. Mental issues
  3. Physical health problems
  4. Gender discrimination
  5. Mobbing
  6. Homelessness
  7. Burnout
  8. Stroke of fate
  9. Financial crisis
  10. Structurally weak regions
  11. Lack of motivation

Low level of education

A low level of education is a main cause of unemployment.

The better qualified people are, the easier it is to find a job since the demand for well-qualified people is quite high.

In contrast, when people lack proper education, these people are at great risk for unemployment since companies often do not want to employ them.

Depending on the level of competition and the macroeconomic outlook of the economy, a lack of education can lead to huge problems when it comes to finding a good job.

Mental issues

Mental health issues can also be a reason for unemployment.

People who suffer from mental problems will often have no motivation or also not the ability to apply for jobs in a proper manner.

Moreover, these people often have problems to focus, which makes it even harder since even if they find a job, they may have difficulties not to get fired since their quality of work may be quite poor due to these concentration problems.

Physical health problems

Physical health issues may also contribute to an increased probability of unemployment.

Especially people who are suffering from disabilities may have it hard to find a job since companies often refrain from employing disabled people.

Additionally, if you suffer from other serious health issues like chronic diseases, companies may not want to employ you since they fear that you will often be sick and not a productive worker.

Gender discrimination

In some countries, there is still a huge gender gap between men and women.

Women are often not treated equally compared to men, which also translates into significantly worse job opportunities.

Moreover, in some cultures, women are meant to stay at home and take care of the kids instead of pursuing a career, which further increases the risk of unemployment since companies may not be willing to employ women in these regions.


Some people may also be victims of mobbing at work.

These people often see no other way out than to quit their job to escape bullying practices.

However, if these people do not have a good qualification, they might end up in long-term unemployment since they may not be able to find a new job.


If you are homeless, chances for getting a job are quite low since you do not have a permanent residential address, which in turn implies that the communication between you and potential employees may be quite hard.

Moreover, many companies refrain from employing homeless persons since they fear that these people will not be able to perform and the company may lose money due to mistakes.


People who previously worked in mentally demanding jobs but now suffering from burnout will also have it hard to find another job due to their mental issues.

Especially in our current society, burnout is quite a big issue.

Over the past few decades, people feel increasing pressure from their job, which often translate into mental issues.

People suffering from burnout may need plenty of time to recover before they have the mental ability to go back to work, which can result in significant unemployment.

Stroke of fate

If people who are closest to you die or if you suffer from other strokes of fate, you may not be able to deal with the situation in a mentally healthy manner and may suffer from mental conditions due to that.

In this case, you may no longer be able to work in your job since you may simply not be able to concentrate.

Thus, strokes of fate can also lead to unemployment, depending on the mental strengths of the individual person.

Financial crisis

In case of a financial crisis like in 2008, many firms may have to terminate job contracts since the demand for their services or goods drops significantly and they will have to fire people in order to survive this period of economic distress.

Depending on the severity of the crisis, this can lead to a significant increase in unemployment rates.

Structurally weak regions

There are also many regions which have a quite weak economic infrastructure, meaning that there are not enough firms to provide sufficient job opportunities for the local population.

This may be due to unattractive corporate tax levels or also due to political instability in some countries.

Therefore, in these structurally weak regions, there are simply not enough jobs and unemployment rates may be quite high due to that.

Lack of motivation

Some people may also just have not enough motivation to work at a job.

These people may enjoy watching TV or playing video games all day long instead of working.

This lack of motivation for work may be especially high for people who only have a low level of education and who would only be able to earn quite low wages, which makes it unattractive for them to work, especially if there is sufficient social security to cover their basic expenses.

Effects of Unemployment

  1. Mental health issues
  2. Physical health issues
  3. Lower life expectancy
  4. Homelessness
  5. Drug use
  6. Poverty
  7. Social isolation
  8. Adverse effects on children
  9. Illegal activities
  10. Economic effects

Mental health issues

Unemployment can lead to severe mental health problems, especially for people who made their work their single purpose in life.

These people may often find themselves in a difficult mental state since they just basically lose their whole life once they become unemployed.

Some people may also feel not valuable when they have to stay at home instead of going to work, which may lead to mental issues like depression.

Physical health issues

Since our body and our brain are complex systems and both are connected to each other, mental issues related to unemployment may also translate into physical health issues like headaches or more serious things like cardiovascular diseases. Sleeping problems related to stress may further increase the risk of serious health issues like heart attacks.

Lower life expectancy

Unemployment may also lead to lower life expectancy.

Especially people who are unemployed for a quite long time may lose their will to live at one point since they often lack social contacts and do not feel like a valuable member of society anymore.

Moreover, physical and mental health issues related to unemployment may further reduce life expectancy for the respective persons.


Unemployment may also increase the chance of homelessness.

Especially in cities with high rents, people who become unemployed may struggle to keep their homes since they may no longer be able to pay their rent.

Once they lose their homes, these people may end up homeless if they do not have family members or friends who can help them out with accommodation.

Drug use

Unemployment can also lead to substance addiction.

People who mentally suffer from unemployment a lot may try to fight their emotional issues by using substances of all sorts.

Even the use of legal drugs like alcohol may lead to serious issues once people become dependent on the substance.


Unemployment, especially long-term unemployment, may also lead to a significant level of poverty.

Since most people rely on their jobs in order to be able to pay their bills, once these people lose their jobs, they may no longer be able to afford the things for their daily life and may suffer from significant poverty.

Social isolation

Losing your job may also lead you into social isolation.

Since we spend so much time in our jobs, many connections and friendships result out of it.

However, if you are unemployed, chances are that the number of social interactions you have are quite limited, since many friends of yours may have to work and may not be able to spend time with you.

Adverse effects on children

Children who come from families with unemployed parents often have a greater risk of unemployment themselves since parents often have a great influence on their children.

Imagine you grow up in a family where your mother and father are at home all day long and do not care about working.

Chances are that you might consider this behavior as normal and you may behave similarly to them once you turn into a grownup.

Illegal activities

Unemployed people, especially those who also suffer from drug addiction, may be willing to engage in serious illegal activities in order to be able to satisfy their addiction since they feel that they do not have too much to lose and are willing to take the risk to go to jail.

Economic effects

Apart from the effects of unemployment on individuals, there are also significant adverse economic effects related to unemployment.

Economies lose large amounts of money since they have to financially support unemployed persons.

Moreover, they also lose significant levels of workforce, which further increases the financial burden related to unemployment.

Solutions for Unemployment

  1. Better education
  2. Motivation programs
  3. Programs against drug addiction and homelessness
  4. Fight discrimination
  5. Support programs for mental issues
  6. Subsidies for companies how are reintegrating unemployed persons
  7. Fiscal and monetary measures in a financial crisis situation
  8. Fight structural unemployment
  9. Create jobs

Better education

In order to fight unemployment, it is crucial to improve education levels of people so that it will be easier for them to find a job.

This education should start early in school and teachers should pay close attention and take care of every child to ensure good educational progress.

Moreover, children from families that do not care about their education at all should be supported by community programs and financial aid so that these children also have a fair chance to increase their level of education and find a good job once they turn into adults.

Motivation programs

Jobless people who are not willing to work at all have to be incentivized to get a job.

This could mean that their social security levels may be lowered if they do not take action to go back to work.

It could also mean that these people are forced into programs in which they get taught about the advantages of getting out of unemployment so they have a broader perspective on the chances of employment and might be more willing to search for a job.

Programs against drug addiction and homelessness

Before homeless people and drug addicts are able to get and maintain a job, these people often need support from social workers or programs in order to find their way back into society.

These programs should show these people a future perspective so that they are willing to take the hard way out of addiction and homelessness and start a new life. By doing so, we will be able to bring part of these people back into occupations.

Fight discrimination

We should also try to fight all sorts of discrimination as a society.

This also includes gender inequality. In countries where women are still repressed and not seen as equally important as men, governments and celebrities should speak up and show the general public that women are as important as men and therefore job discrimination due to gender is not a senseful behavior.

By doing so, the job opportunities for women may improve since the acceptance towards them will be increased.

Support programs for mental issues

Since mental health issues often prevent people from having a job, it is crucial that these mental problems are treated appropriately so that we can reintegrate these people back into the workforce as soon as possible.

People who are working in jobs that are mentally demanding should also take care of themselves in order not to be at risk for burnout.

By taking these measures, individual unemployment can be reduced further.

Subsidies for companies how are reintegrating unemployed persons

Many companies also refrain from employing unemployed persons, especially if these persons suffer from long-term unemployment.

In this case, it might be senseful to provide financial incentives by governments for these firms if they are willing to reintegrate long-term unemployed persons into the workforce by offering them a job.

By doing so, these people may be able to get a job and therefore may be able to get out of unemployment.

Fiscal and monetary measures in a financial crisis situation

In case unemployment is due to a financial crisis, central banks should take appropriate measures in order to get out of this crisis situation by applying fiscal or also monetary policy measures.

These measures could help to stabilize the global economy and may prevent a further downward slope which in turn would result in even higher unemployment.

Thus, in financial crisis situations, it is crucial that central banks take suitable measures in order to prevent high levels of unemployment.

Fight structural unemployment

Structural unemployment is hard to fight and will take a quite long time.

It can only be fought if governments take action for a better qualification of workers so that the incentive for companies increases to employ these workers.

It also has to be analyzed which kinds of workers are needed in the respective region so that they can be qualified accordingly and are able to get out of unemployment.

Create jobs

An intuitive measure to fight unemployment is to create jobs.

Jobs can be created in several different ways.

The creation of jobs often involves raising the incentive for companies to employ people and open branches in weak economic regions.

This can often be accomplished by giving firms financial incentives like tax advantages or other incentives to offer jobs for the local population.


Unemployment can be a serious problem, especially in structurally weak geographic regions where firms do not have proper incentives to open branches.

There are several different kinds of unemployment.

Some people simply do not want to work, others urgently search for a job but are not able to get one.

In order to be able to fight high levels of unemployment, governments have to take suitable measures.

This could mean giving firms the incentive to employ more people or also to provide better education for the general public so that unemployment decreases naturally.

By doing so, more people can get back into work and the overall quality of life for people is likely to increase.





About the author

My name is Andreas and my mission is to educate people of all ages about our environmental problems and how everyone can make a contribution to mitigate these issues.

As I went to university and got my Master’s degree in Economics, I did plenty of research in the field of Development Economics.

After finishing university, I traveled around the world. From this time on, I wanted to make a contribution to ensure a livable future for the next generations in every part of our beautiful planet.

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