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There is no way you talk about the labor market without mentioning or thinking about two major pillars-Wages and employment. You cannot have a staff-structure when there are no resources to pay them and if such is the case, there would be no companies or industries. What about unemployment? Knowing its causes, consequences and solutions will go a long way in strategising job creation to boost the economy of an area/country. These are two essential facets of the labor market which cannot be over-emphasized.
Factors which influence the level of wages
1. productivity: The higher the level of production, the higher the level of wages and salaries, and the lower the level of production, the lower the level of wages-it is as simple as that.
2. Inflation: Inflation can induce employees to demand for increase in the level of wages.
3. Rising income: The rising incomes in key sectors of the economy (e.g, the public sectors can lead to a general increase in wage limits. For example, the United states Government raised the minimum salary of federal workers to $5,000 a month. All other employers will have to adjust their wages and salaries from this amount upwards.
4. Demand for and supply of labor: If the aggregate demand for labor is low, there is the tendency for the level of wages to fall but if the aggregate demand for labor is high, the level of wages would rise.
5. Effectiveness of trade unions: Activities of trade unions through bargaining power can lead to increased wage level.
6. Technical changes: Technical changes such as improved and more effective process of production will lead to increase in productivity and ultimately higher wage rates.
7. Quality of labor: The quality of labor in terms of skills or training determines the level of wages or salary attracted. Highly educated and professional workers attract higher level of wages than unskilled workers.
8. Condition of the economy: When the economy is buoyant, workers enjoy a high level of wages, but when the economy is in recession, wages and salary levels fall.
Causes of unemployment
1. Inadequate educational system: The educational systems practiced by most developing countries are inadequate as special attention is paid to paper qualification to the detriment of job creation.
2. Lack of industrial growth: Most developing countries do not have industries that are capable of employing enough workers. This leads to unemployment.
3. Over-population; When a country's population is too high, it tends to produce many workers and such workers may not have jobs to do, thereby leading to unemployment.
4. Lack of social amenities: Labor tends to be unavailable when there are no social amenities in the area.
5. Geographical mobility of labor: Due to certain circumstance, labor find it difficult to move from one geographical area to another and this results in unemployment.
6. High cost of education: As a result of the high cost of acquiring education, may find it difficult to go to school and so end up with low paper qualification, which may not permit them to get good employment.
7. Use of automated machines: The use of automated machines in factories reduces the need for many workers and this leads to unemployment.
8. Deficiency in demand: An overall fall in demand for goods can lead companies to retrench workers.
9. poor development plans: Government does not normally put in place development plans that can create employment opportunities.
1. Increase in crime rate: When there is a large number of unemployed persons, it usually leads to increase in crime rate such as armed robbery, car snatching, hired assassination, kidnapping and many more, just in a bid to survive.
2. Threat to peace and stability: With an ever increasing number of unemployed persons, the peace and stability of the state will be threatened.
3. Reduction in investment: The zeal to invest is always very low when there is a high level of unemployment
4. Migration; When there is unemployment, is usually results in able youths and adults alike moving out of the country to look for jobs in other places.
5. Waste of human resources: The time, money and energy spent in acquiring degrees and certificates will be wasted and labor is made idle.
6. High rate of dependency: The level of dependency will increase as a result of unemployment.
Solutions to problems of Unemployment
The government can establish many industries that can employ many workers. Also, population should be controlled to obtain optimum level, so as to match the human population with available natural resources. The enabling environment can be created so that labor should be able to move from one geographical area to another. Another way is, the education system can be re-designed for graduates who are able to create employment.
Other ways are: proper development plans can be put in place to cater people who are unemployed; the availability of social amenities does encourage workers and this tends to reduce unemployment and finally giving incentives to potential investors. This last point can be achieved if potential investors are encouraged to set up industries that can absorb the unemployed. Incentives like tax holidays, provision of social amenities, etc will encourage investors to set up businesses that can employ workers.
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Source by Funom Makama
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