Name:

Professor:

Course:

Date:

Unemployment: Temporarily Meeting the Basic Needs of the Unemployed

Unemployment is a term that is used to refer to a person or persons that are currently unemployed, but who are also employable and looking for work (CFI Education Inc.) Unemployment can be caused by several different things, ranging from supply shortages to the incorporation of new technology. Unemployment causes changes in the country’s economy depending on the amount of those in the country that are unemployed. Because of this, the United States government started a program for the unemployed in 1935 called Unemployment Insurance (Eligibility Team). Unemployment Insurance is a program that was born through the United States' financial and economic hardships to benefit both the unemployed and the economy, by giving temporary financial benefits to the unemployed, so that consumer buying and a growing economy be maintained.

Unemployment Insurance

There are a few different types of unemployment, and each type pertains to each different unemployment situation. The unemployed person may qualify for Unemployment Insurance based on their unemployment type. The four different types of unemployment are Demand Deficit Unemployment, Frictional Unemployment, Structural Unemployment, and Voluntary Unemployment (CFI Education Inc.). Demand Deficit Unemployment is when there is unemployment caused by a recession, this happens when companies cut back on production which then causes them to make employee cuts. Frictional Unemployment is caused when people who were recently let go or quit their job, are looking for new jobs that better match their skill set (Amadeo). Structural Unemployment happens when the skill set of a worker doesn’t match the demands of the jobs that are currently available or when a worker cannot reach the location of their job due to relocation. Voluntary Unemployment occurs when a worker decides to leave their job due to their place of work not paying them enough and the job is no longer financially compelling, this happens most when the worker is no longer taking home enough to pay for their cost of living (Amadeo).

Unemployment Insurance applies to most of the unemployed, however, Unemployment Insurance is not applicable is workers who have chosen to leave their job due to personal decisions, such as going back to school. The benefit payments of Unemployment Insurance are intended to partially replace the wages the unemployed worker no longer receives (Hotfelder). The amount the unemployed receive in their benefit payments is based on a percentage of how much the unemployed had received in wages at their previous job. Each state uses a different formula to decide the benefit payments for their unemployed and most states offer unemployment benefits for use to 26 weeks or half a year (Hotfelder). The Unemployment Insurance program began with the Social Security Act in 1935 and was created to help the country during times of economic need (Eligibility Team). The purpose was to limit the hardships that come with losing one’s job, when the financial hardships are more stabilized, the economy is also stabilized.

The Effects of Unemployment

          Unemployment affects many things, especially in a person’s personal life, but not only does unemployment affect the financial lives of the unemployed, but unemployment also causes effects on the country’s economy (CFI Education Inc.). When enough people are unemployed, consumer spending dips, and the economy is affected, because consumer spending is what grows the economy and when there is a lack in spending, there is a lack of growth. This would occur when unemployment rates rise higher than 5% and 6% (Amadeo). When unemployment rises this high, it also produces a reduced demand and reduced consumption which causes a lower profit for businesses and companies, this then leads those businesses and companies to do budget cuts to meet the new demands. These budget cuts create a cycle of reductions in production and employment (CFI Education Inc.).

Summary

Unemployment can be caused by many different things depending on each situation and the current state of the economy. When unemployment rises to a certain level it can also affect the economy, which is why the government put the Unemployment Insurance Program into place to benefit both the economy and the employed. There are different types of unemployment and depending on the situation many unemployed people qualify for unemployment benefits, this enables the unemployed to avoid financial hardship and keeps consumer spending going, so that the economy may continue to grow.

 

Works Cited

Amadeo, Kimberly. "What Is Unemployment?” The Balance, The Balance, 12 Jan. 2022

CFI Education Inc. "Unemployment.” Corporate Finance Institute, Corporate Finance Institute, 31 Jan. 2021,

Hotfelder, Aaron. "Unemployment Benefits: How Much Will You Get?” Www.nolo.com, Nolo, 4 Oct. 2021

Eligibility Team. "The History of Unemployment Insurance.” Eligibility, 18 June 2020