The Major Causes of Unemployment: The Reasons Why People Lose Their Jobs

The Major Causes of Unemployment: The Reasons Why People Lose Their Jobs

When a person is in dire need of a job but unable to find it, this phenomenon is called unemployment. There are various causes of unemployment. The nature of unemployment varies from the economic condition and financial policies of any country. 

What Causes Unemployment?

The following list will highlight some of the common reasons why a person may lose their job. Note that this list is not comprehensive; no one cause of unemployment is more important than any other, and some factors are simply not discussed here.

Causes of Unemployment: The Reasons Why People Lose Their Jobs

Too Many People Are Available

When someone is unemployed, their current company should find work for them before offering that person a new job. However, if there are too many people available for a given job, a person who is unemployed may be unable to find work.

Covid-19 and Unfavorable Market

The year 2021 remained very unfortunate for the businesses and job market. Factories and other businesses are not performing well. This uncertain situation is causing a lot of trouble to create new jobs.

Even workers are losing their job due to the shutdown of the factories. If there are not enough jobs available in a given location, the unemployment rate could be high.

The Insatiable Demand for New Products

A fact of economics is that with demand, you get to supply. That is why supply and demand are two of the most basic concepts in economics. When there is an insatiable demand for a new product, for example, a new type of car, or a new computer system, the owners of existing products find it difficult to meet this demand, even if they are able to afford it.

The Anabolic Effect of Too Much Debt

Debt is a valuable thing. However, when it becomes excessive it can be detrimental to your personal well-being and to the well-being of your family and friends.

The Unexpected Shocks of Foreclosures

The fact of the matter is that many people have lived through many other bad economic situations and were able to overcome them.

The Rise of the Machines

We’ve heard it all before. In fact, people have been saying that jobs will be replaced by computers since the industrial revolution. Yet, it’s never happened. Instead, people have discovered different ways to automate tasks and keep up with the times. The machine that replaces the factory worker used to require physical effort. Now, an employee’s job is more easily done by an automatic machine. In fact, jobs that rely on repetitive motions are the ones most likely to be replaced by machines.

Technology has changed the world. Now, many industries depend on the productivity of machines to function. The number of workers employed in the manufacturing and service sectors has decreased in the last few decades.

Too Few Jobs, Too Many Workers

Too many people are looking for jobs and there are not enough available jobs. The problem with this situation is that no jobs are created because all the qualified candidates have already found them. This situation is called the mismatch between supply and demand. This creates two main factors for unemployment:

· “Too many workers chasing too few jobs”

· “Not enough jobs for all the workers”

Essentially, people would be hired in their desired occupations. But the workers who want to apply for the jobs are not available. This creates a gap in demand for labor. But the supply of jobs is not sufficient to fill this gap.

Greed and Corruption in the Economic System

Jobs are generally seen as the main source of income for many, and with good reason. However, many job seekers are finding that what they really want is to earn a living and support themselves and their families. The current economic system, which has created what is known as the “shadow economy” allows employers to have complete control over the workers they hire, thus causing numerous problems.

Problems of Lack of Efficiency

The recruitment process needs to be modified. Many hiring managers are hiring only those with the best credentials and at the lowest price. As a result, those who do not have a degree and cannot afford the exorbitant amount required for formal college education are left unemployed.

A Lack of Education

In the United States, there are two ways that education can negatively impact job prospects. The first is that graduates of certain high school diploma programs, such as vocational education programs, may not be able to find work that requires that skill. For example, engineers will often only apply for jobs that require a high school diploma. However, high school dropouts may not have the skillset that employers are looking for.

The second is that higher education is sometimes misused. The American College Advantage, for example, is an educational program that is frequently recommended to many high school graduates who are considering going on to college.

The Collapse of Subprime Mortgages

Housing was an essential element of the American dream for the middle and lower classes. But it was also a driver of the U.S. economy. The collapse of subprime mortgages in 2007 greatly impacted the economy as housing prices fell and middle-class homeowners defaulted on their loans. But, not all of the housing market was affected.

According to the news sources, the foreclosure crisis continued to cripple commercial and semi-commercial real estate. Commercial real estate, which consists mainly of office buildings and shopping centers, dropped another 13.6 percent between January 2007 and June 2009. Since this was a decrease of only 3 percent since the same period of 2007, it’s easy to see how commercial real estate led to the next trouble spot in the economy – the construction industry.

Declining Foreign Investment

It is estimated that about 16% of businesses fail in the United States each year. A similar estimate was made for countries around the world and the amount was about 22%. This implies that up to 53% of businesses in the world fail every year.

When one entity has a big loss and it is not able to recover, the rest of the companies will have a similar situation. This is the reason why foreign investment is on the decline in the United States.

High Gas Prices

It is an unfortunate truth that any increase in gas prices leads to a decrease in demand for automobiles. Thus forcing dealers to decrease the number of vehicles on the roads. This drives the auto dealers to reduce their staff, thus leading to people losing their jobs. A huge spike in gas prices has been seen in the last quarter of 2021.

A Disappearing Middle Class

High rates of unemployment are often associated with unstable work hours, reduced hours, reduced benefits, increased working hours, and reduced job quality, according to this post in the Huffington Post. Even when jobs are available, people are forced to accept wages far below the amount that they are accustomed to earning. This trend, along with long hours and less job security, has left many people without the financial means to provide for their families, making them unable to maintain a stable living standard.

Many workers need to take on side jobs to maintain a minimum level of income, such as driving for Uber or other ride-sharing services. 


Understanding the causes of unemployment is an important step in preventing it. The causes of unemployment are unique to each individual, and understanding the source of each issue can help identify potential solutions. This will ultimately help to create a work environment that provides workers with the skills that they need in order to provide an efficient and effective service.

A strong and viable policy is needed to implement in order to get rid of the curse of unemployment. Governments are working with international financial organizations to root out this problem. Hopefully, the years of 2022 will bring happy news for all of us.

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