how to solve the problems of unemployment

The latest word on President Obama’s $448 billion proposal to create up to 2.1 million jobs is that it won’t pass Congress in one piece.  One reason may be the high price tag per job. To reduce unemployment, we need a comprehensive attack that’s cost-effective, well-targeted, well-implemented, and well-administered -- and that works both sooner and later.

Here’s a five-part strategy that fits that bill.  My proposal  would create 4 million new jobs for less than $60 billion net, and it’s far more affordable and effective than President Obama’s.

1. Expand energy development that improves the environment. Speeding up permits for extraction and distribution would allow the U.S. to substitute natural gas for dirtier coal and oil, create hundreds of thousands of high-wage and high-value jobs, reduce foreign oil imports, and lower oil prices and world demand for oil. Converting truck and car fleets from gasoline to natural gas looks increasingly cost-effective and can cut smog and other emissions too.

2. Increase demand for owner-occupied housing. One way to jumpstart housing construction is to create 1 million homeownership vouchers patterned after the rent voucher system, while phasing out the Low-Income Housing Tax Credit, an inefficient subsidy that simply expands supply.  Another zero-cost  housing-related proposal is to  make today’s low mortgage rates available to homeowners whose mortgages are current but who can’t get refinancing because their home value or their income has declined.

3. Provide a generous tax credit for expanding employment. The federal government gives employers a 15% subsidy for increases in the employer’s wage bill (the part subject to social security taxes) above the prior year’s level in the first year and 10% in the second year.

4. Expand apprenticeship training. Apprenticeship combines serious, work-based learning with classroom instruction so novices master core occupational skills and earn valued credentials documenting that mastery.  Government could offer a $6,000 subsidy per apprentice for increases in registered apprenticeship beyond 80% of last year’s level and beef up the Labor Department Office of Apprenticeship’s marketing and technical assistance programs.

5. Fund direct job creation. Years ago, Canada managed to create relatively low-wage jobs by requiring nonprofit sponsors to compete for funding—specifying the “public goods” they promise to produce, whether bike paths, repairs and weatherization for low-income housing, recreational centers, child care, or home care assistance for the elderly and disabled.

Together, these five actions would likely stimulate enough jobs to pull the unemployment rate from 9.1% to 5.5%.

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Unemployment Solutions and What's Most Cost-Effective

The best way to solve high unemployment.

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

Monetary Policy

Fiscal policy, the most cost-effective solution, fiscal policy risks, the bottom line, frequently asked questions (faqs).

The solution for unemployment is, of course, to create new jobs. The number of jobs that need to be created depends on the unemployment rate and the number of people entering the labor force in search of work. When unemployment creeps above 6% to 7% and stays there, it means the economy can't create enough new jobs. That's when the government steps in.  

For historical data on U.S. unemployment trends, the Bureau of Labor Statistics publishes the  unemployment rate by year .   It reports the annual percentage of the unemployed in the labor force, as far back as 1949. It also indicates the success or failure of the fiscal and monetary policies through the years, since they affect the rate of unemployment. 

The first solution is  expansionary monetary policy from the Federal Reserve. It's powerful, quick, and effective. Lower interest rates make it easier for families to borrow what they need. That includes expensive items like cars, homes, and consumer electronics. It stimulates enough demand to put the economy back on track. Low-interest rates also allow businesses to borrow for less. That gives them the financial capital to hire enough workers to meet rising demand.  

If the recession is really severe, then monetary policy might not be enough on its own. That's when fiscal policy is needed. The government can either cut taxes or increase spending to stimulate the economy. An expansionary fiscal policy  is slower than monetary policy to get started. It takes time for Congress and the president to agree on the next steps, but it can be more effective once executed. It also provides much-needed confidence that the government will turn things around. Confidence is crucial for convincing people to spend now for a better future.

Cutting taxes works like lowering interest rates. Both give businesses and consumers more money to spend. That increases demand. It gives businesses more cash to invest and hire more workers. 

Government spending can also take the form of jobs programs. The government can hire employees directly. It also contracts with companies to build things and provide services. It provides consumers with the cash they need to buy more products.

Dollar for dollar, what's the best investment that creates the most jobs? A University of Massachusetts Amherst study found that  building mass transit  is the most cost-effective solution. One billion dollars spent on public transportation creates 19,795 construction jobs.

Unemployment benefits can provide growth as well. According to Wayne Vroman, an economist and senior fellow at the Urban Institute for the Department of Labor, unemployment insurance led to the creation of 1.6 million jobs on average each quarter from 2008 to 2010. The unemployed are most likely to spend every dime they get. They buy basics like groceries, clothing, and housing. As a result, every dollar spent on unemployment benefits stimulates $1.64 in gross domestic product.

How can $1 create $1.64? It does it through the ripple effect. For example, a dollar spent at the grocery store pays for the food. It also helps pay the clerk's salary, the truckers who haul the food, and even the farmers who grow it. The clerks, truckers, and farmers then buy groceries. This ripple effect keeps demand strong, creating added benefits. Stores keep their employees to supply the goods and services the unemployed need. Without these benefits, demand would drop. Then retailers would need to lay off their workers, increasing unemployment rates. 

Unemployment benefits work fast. The government writes a check that goes directly into the economy. Public works projects take longer to get implemented. The plans must be updated, workers hired, and supplies delivered. 

Funding education is also an effective unemployment solution. One billion dollars spent hiring teachers adds $1.3 billion to the economy. Better-educated people can get higher-paying jobs. They can buy more things with the higher wages they earn. Each $1 billion spent can create 17,687 jobs. That's much better than defense spending . It only creates 8,555 jobs for the same investment. Defense is more capital-intensive. Modern defense relies more on drones, F-35s, and aircraft carriers than soldiers.

The most popular fiscal stimulus is across-the-board  income tax cuts . That's not the most cost-effective, according to the UMass/Amherst study. One billion dollars in cuts creates 10,779 jobs. Workers only spend half the money, which in this case is only $505 million. 

As a result, reductions in the tax rate are not the most effective way to help job growth. Most people don't realize they are getting a break until tax time. The tax cut means they pay less in taxes, but they still have to pay. Psychologically, they are less likely to spend anything extra. It just doesn't feel like a bonus. As a result, people are more liable to save anything they get or use it to pay down other debts.  

A more effective tax cut is in businesses' payroll taxes. The best place to give business tax relief is with small businesses. From 2000 to 2018, they produced 65% of all net new jobs created.  

The downside of fiscal policy is that it could add to the budget deficit. That creates more government debt. As debt approaches 100% of the economy's total output, it slows economic growth. Investors could lose the desire for that government's debt. This makes interest rates rise, increasing the cost of borrowing.

Advocates of  supply-side economics  say that, over time, tax cuts boost the economy enough to replace any lost tax revenue, but according to the Laffer Curve, that's only true if taxes are over a certain threshold to start with.  

The government uses two policies to tackle unemployment: monetary and fiscal.

Expansionary monetary policy increases the money supply and:

• Has more immediate effects
• Stimulates demand, production; and ultimately, employment
• Is managed by the Federal Reserve or a central bank

Expansionary fiscal policies include government spending and tax cuts. These:

• Take more time to have an impact
• Have a greater impact on consumerism, so they are more effective as economic stimuli
• Increase government debt and add to the budget deficit

The most cost-effective solutions are fiscal. Building mass transit, granting unemployment benefits, funding the educational sector, and payroll tax cuts allow consumers to gain more income which they spend to spur demand.  

How does a high unemployment rate affect the economy?

High unemployment can have detrimental effects throughout the economy. When fewer workers are working, it reduces production and GDP. Unemployed workers drain resources from state and federal governments while tax revenues are simultaneously cut. Persistent unemployment can have serious societal effects, as well. A study conducted during the Great Recession showed how extended unemployment can hurt workers' long-term earning potential, which can affect the economy for years to come.

What is the natural rate of unemployment?

The natural rate of employment is an estimate of how low unemployment would go when inflation is stable and economic production is steady. It's difficult to estimate with precision, but economists suggest that it usually hovers around 4.5% to 5.5%. In other words, when the economy is stable and growing neither too quickly nor too slowly, natural unemployment will usually fall somewhere within that range.

Stanford University. " Why Has the Unemployment Rate Fared Better Than GDP Growth? "

U.S. Bureau of Labor Statistics. " Labor Force Statistics From the Current Population Survey ."

Board of Governors of the Federal Reserve. " How Does Monetary Policy Influence Inflation and Employment? "

International Monetary Fund. " Fiscal Policy: Giving and Taking Away ."

National Archives. " Estimates of Job Creation From the American Recovery and Reinvestment Act of 2009 ."

Carnegie Mellon University. " The American Recovery and Reinvestment Act: Solely a Government Jobs Program? "

University of Massachusetts Amherst. " The U.S. Employment Effects of Military and Domestic Spending Priorities ," Page 6.

Center for American Progress. " Unemployment Insurance Dollars Create Millions of Jobs ."

Economy.com. " Washington Throws the Economy a Rope ."

Congressional Budget Office. " Economic Stimulus: Evaluating Proposed Changes in Tax Policy ," Page 5.

Congressional Budget Office. " The Fiscal Multiplier and Economic Policy Analysis in the United States ," Page 5.

U.S. Small Business Administration. " Frequently Asked Questions ," Page 1.

Bank for International Settlements. " The Real Effects of Debt ," Page 1.

University of California, Berkeley. " How Far Are We From the Slippery Slope? The Laffer Curve Revisited ."

Economic Policy Institute. " Sustained, High Joblessness Causes Lasting Damage to Wages, Benefits, Income, and Wealth ."

Federal Reserve Bank of San Francisco. " The Natural Rate of Unemployment over the Past 100 Years ."

• 7 Causes of Unemployment 2 of 16

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This article was published more than  9 years ago

Four ideas for fixing the long-term unemployment crisis

There's been a lot written lately on the tragedy of long-term unemployment. Thanks to the lingering effects of the recession, there are still 4.7 million Americans who have been out of work for at least 27 weeks. And, increasingly, they're becoming unemployable.

Some companies  won't even look at the resumes  of the long-term unemployed, and many of these stigmatized workers are simply dropping out of the labor force — possibly for good. Paul Krugman worries that "we are indeed creating a permanent class of jobless Americans."

So is there anything that can be done? There seems to be no shortage of policy suggestions out there. At a sparsely attended Joint Economic Committee hearing on Wednesday, various experts offered some ideas for helping the long-term unemployed.

1) Better training programs.  Harry Holzer of Georgetown University  made the case for  "education and training programs, to create worker skills that better match newly available jobs." Randy Johnson of Workforce Development, Inc.  suggested  a variation on this: Congress could help states set up clearinghouses "that would help employers connect with individuals seeking an internship or another on-the-job learning experience."

2) Wage subsidies for displaced workers. Holzer also suggested wage insurance "for displaced workers whose earnings are permanently reduced by their loss of a good job." Likewise, Johnson told Congress to consider "offering a 'wage replacement differential between a jobseeker’s new starting wage and their past employment as they start out." The idea is that laid-off workers, especially older workers, wouldn't take as big a hit to their paycheck if they had to take low-wage jobs.

3) The government should just hire people.  Kevin Hassett of the American Enterprise Institute  was also on board  with work subsidies and training programs (though he said that government training programs “are a national embarrassment”). But he also made the case for direct government hiring for the long-term unemployed.

“The stigma of long term unemployment may be ameliorated by a short-run jobs program that recruits the long-term unemployed to assist with the normal functions of government,” Hassett said.

4) Congress and the Fed should push for full employment faster. Meanwhile, over at the Roosevelt Institute, Mike Konczal argues that there's a much, much more straightforward way to help the long-term unemployed. Namely, full-employment policies.

When the economy is running on all cylinders and labor markets are tight, then companies  will hire anyone — even workers who have been unemployed for more than a year. This is exactly what happened in the late 1990s:

Of course, that's easier said than done. Think tanks like the Hamilton Project and the Economic Policy Institute have estimated that the United States is still many years away from the full employment levels of 2007 — let alone the very tight labor markets of the 1990s.

So how do we get there more quickly? One possibility is that the Federal Reserve should keep stepping down harder on the gas — although as Tim Duy recently discussed , Fed officials are worried that it's impossible to keep inflation low and bring unemployment down to 1990s levels without creating another destabilizing asset bubble. (In that case, Duy points out, maybe the Fed should think about loosening its commitment to low inflation.)

Jared Bernstein, meanwhile, argues  that Congress should think harder about how to get back to full employment. That might include more infrastructure spending and other stimulus programs. But there also may be a role for "direct public job creation."

He's not talking about 1930s-style WPA programs, but things like a small welfare program in the stimulus that subsidized work for low-income families and, according to one analysis , created some 250,000 “new temporary jobs that would otherwise have not existed.”

Trouble is, Congress would need to pay attention first. And long-term unemployment doesn't seem to be a top priority around Capitol Hill. As National Journal's Niraj Chokshi reported, "When a hearing to explore how to get the long-term unemployed back to work kicked off on Wednesday morning, only one lawmaker was in attendance."

Center for American Progress

A Plan to Improve Unemployment Protections in America

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A new proposal would update unemployment insurance and establish a Jobseeker’s Allowance. Its recommendations would strengthen the nation’s workforce development system, protect families from unemployment, and fortify the American economy against the next recession.

Advancing Racial Equity and Justice, Building an Economy for All, Strengthening Health, Economy, Poverty, Social Safety Net, Worker Rights +4 More

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See also: Strengthening Unemployment Protections in America by Rachel West, Indivar Dutta-Gupta, Kali Grant, Melissa Boteach, Claire McKenna, and Judy Conti

Unemployment insurance, or UI, has been a pillar of the nation’s social insurance system for 80 years. A partnership between the federal government and the states, UI provides critical support for involuntarily unemployed jobseekers and their families by replacing a share of lost wages while workers search for new jobs. UI also helps stabilize the economy during downturns by boosting the spending power of struggling families and creating demand in the economy. In 2009 alone, UI kept more than 5 million Americans out of poverty and saved more than 2 million jobs by boosting demand.

As important as UI has been in the past, the system has not kept pace with changes in the labor force or the economy. With more than two-thirds of American households experiencing at least a year of unemployment during their working years and the next recession inevitably approaching, there is no better time to update this crucial part of the social insurance system, benefiting both families and the economy.

A proposal from the Center for American Progress, or CAP; Georgetown Center on Poverty and Inequality, or GCPI; and National Employment Law Project, or NELP, would modernize UI and create a Jobseeker’s Allowance, or JSA. These recommendations would form a significantly more robust system of assistance for American jobseekers, roughly doubling the number of workers served each year and offering greater protection during economic downturns. And for the first time, the JSA would extend earnings-loss protection to independent contractors and others who are ineligible for UI.

Challenges facing the nation’s assistance system for jobseekers

• Technology and globalization mean that many lost jobs are not returning. Yet too few unemployed workers have access to tools for successful re-employment, first employment, and/or training in a new sector.
• Changes in the American workforce have left workers more vulnerable than ever to involuntary unemployment, but fewer are protected by UI, with disproportionate effects on women, younger workers, workers of color, and independent contractors.
• Since UI was first enacted, recoveries from recessions have become lengthier and increasingly jobless. Meanwhile, UI’s capacity as an automatic macroeconomic stabilizer has been steadily undermined by policy decisions, including states making deep cuts while neglecting necessary financing improvements. As a result, the UI system is unprepared for the next recession.

Reforming unemployment insurance

To protect more working families, CAP, GCPI, and NELP have developed a set of recommendations for Congress and state legislatures. These reforms would ensure a robust employment, training, and income security system for involuntarily unemployed workers.

1. Reduce layoffs and ensure that more unemployed workers have access to re-employment and training tools

• Reinvigorate and expand UI’s effective re-employment programs and services; connect workers with a greater variety of job opportunities; and provide an overdue makeover for outdated technological systems
• Encourage states to bolster tools, such as work sharing programs, that help keep workers in the jobs they already have

2. Provide more Americans with enhanced protection against the shock of unemployment

• Harmonize states’ disparate benefit amounts and eligibility rules, thereby making UI’s earned insurance stronger and available to more American workers—notably, many women and low-paid workers
• Boost labor-force participation and add to UI’s countercyclical impact when unemployment rises

3. Prepare the unemployment insurance system for the next recession

• Strengthen UI’s macroeconomic potential by introducing solvency requirements for state trust funds
• Offer parameters for an improved, fully federally financed Extended Benefits program that would kick in automatically during recessions

Creating a Jobseeker’s Allowance

Even with a modernized UI system, some workers would not qualify. To help these workers actively search for work and improve their skills, we propose a Jobseeker’s Allowance, or JSA—a small, short-term weekly allowance equal to approximately 50 percent of the wages of a typical low-paid worker, alongside services that facilitate employment and connections to job opportunities.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here . American Progress would like to acknowledge the many generous supporters who make our work possible.

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Explain the Measures to Solve Unemployment Problems

Updated on: February 17th, 2023

Measures to solve unemployment problems include changes in industrial techniques, policies regarding seasonal unemployment, change in the education system , expansion of employment exchanges, more assistance to self-employed people, emphasis on full and more productive employment, an increase in production rate, and more importance to employment programs. Along with this, measures like population growth can effectively solve the concern of unemployment in the country.

Table of content

Measures to Solve Unemployment Problems

Unemployment is one of the primary concerns in the present world. A lot of people are dealing with unemployment. The measures to solve unemployment problems are as follows-

• Change in industrial technique: to solve the unemployment problem, a production technique focusing on the needs and means of the country should be adopted. Capital-intensive technology should be replaced by labour-intensive technology.
• Dealing with seasonal unemployment: As agro-based and agriculture sectors provide only seasonal employment. Measures like multi-cropping, animal husbandry, horticulture, plantation, and horticulture should be adopted. Also, industries like the cotton industry should be promoted.
• Changes in the Education system: There is a need to change the present education system. It should emphasize vocational education rather than imparting static knowledge. Colleges and universities should be available to students who wish to pursue higher education.
• Assistance on Self employment: Most people in India are self-employed, but unfortunately, due to a lack of professional knowledge, they are not able to get the desired results. Therefore, they should be helped by giving technical training and using the raw material properly.
• Introduction of new governmental measures: The government should take the initiative to increase labour productivity and develop better employment opportunities for all.
• Population control: Population is one of the major concerns associated with the unemployment rate. Therefore, the population rate must be checked, especially in rural areas where birth control methods and family planning considerations must be discussed more.

Related Questions:

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FAQs on Measures to Solve Unemployment Problems

The unemployment problem is a critical issue that cannot be solved in a short period. However, the measures like change in the education system, assistance to self-employed people, change in the industrial technique, and introduction of better government policies can help tackle the situation.

What are the measures to solve unemployment problems in rural areas?

The concern of unemployment in rural areas can be treated well by the government with the introduction of new government measures. It is necessary to check on the population in such areas. Also, the issue of seasonal employment must be dealt with by measures like multiple cropping.

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How to Solve Unemployment in a Country: Best Tips

Unemployment is a global issue which happens in developed, underdeveloped and developing countries. The major evidence is that even the developed countries are battling with unemployment issues.

A survey has suggested that in 2013 December, about 6.7% of Americans were unemployed.

The international labor organization has mentioned the statistics of both employed and unemployed in 2012 which states that about 6% of the world population are unemployed and youths are the ones who are unemployed i.e youth unemployment .

The government and individuals should take proper remedy steps to solve the unemployment problem and develop the nation’s economy through employment.

What is Unemployment?

Unemployment can be defined as when an individual is hunting for employment and does not find a job, then unemployment arises.

Unemployment is one of the major crises that happens around. The term unemployment measures the economy’s health.

The unemployment rate is usually used for measuring unemployment. It is usually the unemployed individuals divided by a number of labor force people.

The reports as per the international labor organization said that about 200 million globally or about 6% of the complete workforce was unemployed in 2012.

In that manner let’s glimpse through a few aspects of unemployment and the various aspects related to it.

Unemployment Statistics:

The unemployment rate reached a post during World War II to a high of 9.7% in 1982. The data regarding unemployment and earnings was captured by the Department of Labor’s Bureau of Labor Statistics (BLS).

There were other reports too which mentioned the unemployment rate of 9.6% in the year 1983 which was due to an economic recession. This was after the great depression of 1983. It was in 1989 that the unemployment rate dropped to 5% but started enhancing again. This led to 6.8% in 1991 and to 7.5% in 1992.

Once there was an enhancement in an economy, the unemployment rate fell to 6.9% in 1993. The good news was that the unemployment rate fell to about 4.5% in 1998 and to 4% in 2000 which was considered as the lowest in three decades.

It was in 2001 that recession crept in and unemployment rates rose again and then the terrorist attack on September 11, 2001, in the United States was also a reason of unemployment. By 2003 June, about 9.4 million was unemployed where the unemployment rate was elevated to 6%. There was again a decline in the unemployment rate from 2003 to 2007.

The fluctuation started again and there was a rise in the year 2007 and the unemployment rate was 4.9% in 2008 January. People without a job and looking for work are counted as unemployed. It does not include people who have lost their jobs and not looking for it.

Types of Unemployment:

With the many causes of unemployment , the prime causes of unemployment are listed below. People fall under one of these categories as a reason for unemployment. Some of the types of unemployment are as follows:

1. Structural unemployment:

At times when there is a mismatch of skills in the work industry this unemployment occurs. Some of them are partitioned as mentioned below.

Geographical immobility:

Occupational immobility:, technological change:, structural change in economy:, 2. frictional unemployment:.

This type of frictional unemployment prevails in many countries. This type of unemployment is the period which is taken by the individuals while they change their job. Examples are graduates who try to find another job. It surely takes time in order to find another job.

3. Real wage or classical unemployment:

This type of unemployment takes place when the wages in the competitive job market moves above equilibrium.

For example, when the supply of labor is higher than the demanded labor, this type of unemployment takes place. Times when trade unions and labor organizations bargain for higher wages are when this type of unemployment occurs. This leads to a decline in demand for labor.

4. Voluntary unemployment:

Voluntary kind of unemployment is one where people try to be unemployed than being employed. A simple example can be that if individuals are able to get a good benefit, then they prefer to stay back with the benefit rather than being employed.

Frictional unemployment also falls under this category where individuals tend to choose a job until they wanted an appropriate one.

5. Cyclical unemployment or Demand deficient:

The demand deficient or cyclical unemployment takes place when the economy falls below its full capacity. A simple example can be the aggregate demand which falls below at times of recession which leads to weakening in negative economic growth and output.

When there is a drop in the output then the employment of workers will also be less which leads to the development of fewer goods.

There are many firms which move out of the business and result in redundancies in large-scale. There are more workers being laid off during recessions which lead to unemployment.

6. Seasonal unemployment:

This is one category of unemployment which takes place due to seasonal change in the job nature. Few industries that are affected by seasonal unemployment are catering industries, fruit picking, tourism, and hospitality.

7. Youth unemployment:

Youth unemployment is another major concern that is happening. 73 million people are globally neither unemployed nor undertaking education.

Youth unemployment is three times ahead of the elders. In the US, the youth unemployment rate is about 5.7% and about 17% of the nation’s youth are jobless.

8. Casual Unemployment:

Casual employment is the type of employment that comes in, for employees who work on a day to day basis or on short term contracts. When the contract is completed, the employee will get unemployed and that type is known as casual unemployment.

This type of unemployment would not stand for long, as the workers get another contract work or the earlier work gets extended. Most of the places where casual employment exists for people are dockyards, market places, film industry (junior artists), etc.

Here the work of the workers gets completed or lasts for just a few hours or day long and then they get back to the same unemployment position. This process goes on until they find a permanent job. It is very difficult to provide a definite solution to such casual unemployment issue.

9. Chronic Unemployment:

This type of unemployment is mainly seen in undeveloped countries. When a country is suffering long term of unemployment on a whole, then it is known as chronic unemployment. Some of the main reasons of chronic unemployment are,

• Weak economic condition
• Lack of developed resources
• High population growth
• Primitive state of technology
• Low capital formation, etc.

Effects of Unemployment:

Unemployment effects in nations lead to a number of hassles, in that manner let’s glimpse through a few effects of unemployment.

1. Few tax revenues:

Due to unemployment, there are fewer people who work and earn money and hence only less income tax would be collected. There would be less tax revenue collected by the government and would have a large impact on government finances.

2. High supply-side cost:

Due to unemployment, there would be a number of people who do not work. The government needs to teach the employees with skills that are required for the present industry conditions.

So it is the duty of the government to spend by training skills so that they match with the latest industry. This is a drain on the government’s economy due to unemployment.

3. Enhanced welfare cost:

During the unemployment period, few people would work but almost all people would claim for benefits.

Due to this, the government money is drained again. Government finance is used for providing benefits for people.

4. Lower wages:

At times of unemployment, there is an increased supply of labor for employment in firms. In this scenario, there is a decline in wages as there is a number of people ready to work for lower wages.

By this way, the industries have a positive effect and their variable cost would decline.

5. Surplus labor:

Due to the impact of unemployment, there are a number of candidates ready to work and hence, the industries have enhanced choice for employment. They choose skilled labors with more experience.

6. Enhanced demand for inferior goods:

Few goods in an economy are purchased more at times of lower-income for individuals and these are mentioned as inferior goods.

During the unemployment period, people switch over to purchase more of inferior goods due to low income. Inferior goods owner would have a higher profit and sales revenue.

7. Goods and services on less demand:

Unemployment makes individuals avoid buying goods and services as they possess a very low income. In such scenarios, there is lower sales revenue that leads to a decline in profits.

8. Elevated training cost:

Though there are many firms that benefit themselves from low wage cost as a result of unemployment, they also need to spend and train employees as they have been out of work for a long period.

Training employees are accomplished with the firm’s resources and time hence, there is an increase in the employee’s cost.

9. Lower living standards:

Private savings and benefits are the only sources which people rely on at times of unemployment. They do not spend much and buy only fewer goods for their living and hence, they are pushed to a lower standard of living.

10. Loss of depression and confidence:

Unemployment is a period where people are pushed to depression and loss of confidence. It also affects one’s mental and physical health . Almost all people who are unemployed are lead to stress-related depression and also ill most of the time.

11. Loss of skills:

Skills and capability to work are lost by individuals during the unemployment period. The prolonged period a person is unemployed, the more the industries have to train them in order to make them work.

Ways to Solve Unemployment Problem:

Unemployment can be solved if planned properly by the nation from the start. There are a number of ways by which the natural rate of unemployment can be solved.

Some possible ways by which the government and the people can work together to solve long term unemployment are

• Ensuring political stability
• Enhancing the educational standards
• Control of population growth in the nation
• Launch of new empowerment programs
• Encouraging self-employment/ entrepreneurship
• Ensuring access to basic education
• Reducing the age of retirement
• Avoid laziness
• Being creative, positive and competitive
• Being positive to stop unemployment.

With all this, there should be few policies implemented that improve economic growth .

• Lower taxes
• Avoiding investing in unsuitable programs
• Avoiding favorite programs
• Avoiding over-regulation of industries

Monetary policies:

The expansive monetary policy is one main solution which can help avoid unemployment. There should be expansive monetary policy from the Federal Reserve since it’s quick, effective, and powerful.

When there are lower interest rates as mentioned above, they allow individuals to borrow in a cheap manner to purchase a car, consumer goods, and more.

By this way, the interest rates allow the business to borrow money at lower rates which also offers them with capital to hire employees in order to meet rising demands.

These are a few aspects that need to be followed in cooperation with the people and government in order to solve unemployment. National Unemployment rate can be decreased from the nation when planned and implemented in the right manner.

Conclusion:

Natural unemployment is a major concern in any country and hence focusing on it is important in order to save the nation from economic decline.

As unemployment affects every individual in the nation, there needs to be proper economic conditions and maintenance by the government. The government should be prepared in order to take the right steps at times of recession which leads to unemployment. The unemployment solutions to the unemployment problem are also mentioned and hence unemployment is an aspect to be concentrated by all citizens of the country.

Unemployment is a major crisis and may bury the economic condition of the complete nation and hence be following the right procedure is mandatory. People who are unaware of unemployment and not sure about the inner details can run through these points and get benefited. Work towards developing a nation free from unemployment.

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Suggestions to Solve Unemployment Problem

ADVERTISEMENTS:

Following are the suggestions to solve unemployment problem :

(i) Change in industrial technique:

Production technique should suit the needs and means of the country. It is essential that labour intensive technology should be encouraged in place of capital intensive technology.

(ii) Policy regarding seasonal unemployment:

Seasonal unemployment is found in agriculture sector and agro based industries.

To remove it:

(a) Agriculture should have multiple cropping,

(b) Plantations, horticulture, dairying and animal husbandry should be encouraged,

(c) Cottage industries should be encouraged.

(iii) Change in education system:

Educational pattern should be completely changed. Students who have liking for higher studies should be admitted in colleges and universities. Emphasis should be given on vocational education. Qualified engineers should start their own small units.

(iv) Expansion of Employment exchanges:

More employment exchanges should be opened. Information regarding employment opportunities should be given to people.

(v) More assistance to self employed people:

Most people in India are self employed. They are engaged in agriculture, trade, cottage and small scale industries etc. These persons should be helped financially, providing raw materials and technical training.

(vi) Full and more productive employment:

The main objective of county’s employment policy should be to increase employment opportunities and productivity of labour. Govt. should adopt a policy that provides employment to all people.

(vii) Increase in Production:

To increase employment, it is essential to increase production in agriculture and industrial sectors. Development of small and cottage industries should be encouraged.

(viii) More importance to employment programmes:

In five year plans more importance should be given to employment. The programmes like irrigation, roads, flood control, power, agriculture, rural electrification can provide better employment to people.

(ix) High rate of capital formation:

Rate of capital formation in the country should be accelerated. Capital formation should be particularly encouraged in such activities which generate greater employment opportunities. Capital output ratio should be kept low.

(x) Industries in co-operative sector:

Industries in co-operative sector should be encouraged. Kerala Govt.’ set up a textile mill covering 600 unemployed persons on co-operative basis. This is a novel approach to fight against unemployment. Different State Govt. should take necessary steps in this direction.

(xi) Decentralisation of industrial activity:

Decentralisation of Industrial activity is necessary to reduce unemployment. If industrial activities are centralised at one place, there will be less employment opportunities in the under developed areas. So Govt. should adopt such policies which encourage decentralisation of industrial activity.

(xii) Population control:

The growth of population should be checked in order to solve unemployment, problem. Family planning programme should be implemented widely and effectively.

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10 Ways to Cut Unemployment in Half

With unemployment expected to remain above 9 percent for the next year, the government is considering fresh steps to add jobs. 24/7 Wall St. looked at ten possible solutions that could help return us to full employment, which most economists consider around 5 percent. None of these plans are new, many of them are expensive, and some of them have not been used in America for decades, if ever. But in the worst recession of the post-war era, they all deserve consideration. 1. Germany has a government policy which provides tax credits to companies that shorten work hours rather than lay off employees. Let's say there's a company with 100 jobs that wants to slash its payroll by 10 percent. It can fire 10 people. Or it could reduce hours by 10 percent and get a tax credit from the government to make the employees "whole." Companies save money, but add workers. 2. Saving Small Business. Economists repeatedly make the point that small businesses are and have been the primary engine of job creation in America. They're also at a disadvantage. Large companies have easier access to capital markets and low interest rates even with the depressed economy. By contrast, banks have been reluctant to fund small operations that have little or no cash and uncertain prospects and a relatively small number of customers. The federal government should shoulder some of the risk of small business loans and provide new incentives for banks to lend to smaller businesses. 3. Tax Credits. Tax credits will almost certainly be part of any program to improve unemployment because businesses need a concrete reason to hire during a difficult economic period. Companies have become used to employing people part-time to keep the costs of benefits and severance low. Any plan to increase the number of full-time workers in the labor force will need to address this "part-time" issue. The federal government could provide a tax credit to companies who hire new workers or convert workers from part-time status. This would give enterprises that would like to expand, but are ambivalent about the economy, an incentive to do so. 4. Working For The Government. Many of the FDR economic stimulus programs of the 1930s were failures when viewed through the lens of permanent job replacement. But giving people work, even it if is not permanent, helps buoy the economy during sharp downturns. The Works Progress Administration, created in 1935, added nearly eight million jobs to the economy. Rather than pay the unemployed to stay idle, the government gave them job skills that were useful when the economy recovered. 5.  State Jobs, Not Projects. Not enough of the first stimulus package went to direct job creation and too much went to tax incentives. State and municipal governments have been decimated by the downturn and they require money immediately, if for no other reason than to keep them from firing and furloughing more workers. 6. Pressing China. It will be hard for the economy to recover and for the jobs picture to improve if China keeps its currency advantage compared to the US. The value of the yuan almost certainly improves China's ability to keep the costs of its exports to the US low. It also raise the cost of imports from the US.The federal government would have to do two things to get China to "rethink" its trade and currency policy. Each is risky. The first is that the Treasury Department would have to make a direct threat to Beijing to label it as a Currency Manipulator, a designation which carries with it a number of trade sanctions. The second action by the American government would require that "strategic" imports from China be taxed. This would probably have to include finished metals like aluminum and finished commodities like tires. 7. Underwriting Exports. The Administration has said that the economy needs to boost exports. Even if trade issues with China are resolved, there are still some hurdles. Among the most meaningful is the cost of physical shipping. For products which have low profit margins, the price of air, sea, or ground transportation can be prohibitive. The government could elect to underwrite the cost of shipping, particularly for businesses that are relatively small or larger manufacturing businesses which are in sectors that have had large layoffs. 8. The Minimum Wage. What if we could make the cheapest labor even cheaper -- not for employees, but for employers? Employers would add workers a certain wage below than the minimum wage, and employees would get reimbursed by the federal government. This would not only keep low-wage workers in their jobs, but also it would help businesses add more people for less. 9. Construction Jobs. Construction has been hit as hard as any industry in the recession. With demand for new homes at half-century lows, things could get worse. Construction workers without money can't afford to move to areas where there is still some work. This has created large pools of unemployed workers in the areas of California, Nevada, and Florida. People who build a house cannot build nuclear reactors, but they can work on infrastructure products including the building and improvement of schools and government-owned facilities. We need more money for this kind of construction work. 10. Immigration. There are many metro areas, for example some high-immigration cities in the south, where labor supply swamps labor demand. The federal government can help by providing supplemental aid to these metro areas to create public sector jobs for states and municipalities with particularly high unemployment.

Funding Reduced Pay.