(a) Define the term unemployment. (b) Highlight the effects of unemployment on an economy.

Answer Details

(a) Unemployment is a situation in which people who are able and willing to work, and are actively seeking work at the prevailing wage rate, are unable to find jobs. It refers to the idleness of labour that is available for and seeking employment; it excludes those unwilling or unable to work.

(b) Effects of unemployment on an economy:

• Fall in national output (GDP): idle labour is wasted, so the economy produces less than it could, and income per head falls.
• Lower standard of living: the unemployed and their dependants have little or no income, increasing poverty.
• Loss of government revenue: fewer people earn taxable incomes, while government spends more on relief, so budgets suffer.
• Increase in crime and social vices: idleness and lack of income encourage armed robbery, fraud and restiveness, threatening security.
• Rural-urban migration and drift: people move about in search of work, straining urban facilities.
• Waste of investment in education and training: skills acquired go unused, and workers' skills deteriorate over time.
• Political and social unrest: widespread unemployment breeds discontent and can cause instability.
• Emigration (brain drain): skilled people leave for jobs abroad, depriving the country of manpower.