Is unemployment and underemployment a problem?
The cost of unemployment is both:
• Economic along with the opportunity cost of lost output raised poverty and inequality
• Social exclusion and alienation
The internationally used Labour Force Survey (LFS) measure of joblessness excludes discouraged employees and therefore underestimates how chronic problem unemployment is for LDCs particularly into urban areas.
Moreover LFS avoids the effects of underemployment where employees are visibly active but grossly underutilised comprising:
• Disguised unemployment, here the output of total time employees could be achieved into much fewer hours
• Underemployment: here labour is working fewer hours than they would like consequential into low wages.
• Hidden unemployment: here labour is into second choice jobs or education since the jobs matching their abilities are not obtainable. Hidden unemployment occurs when workers are prematurely retired
Implications:
• The government must get prices right for example remove inexpensive loans and grants for capital intensive projects
• Motivate labour intensive technology where probably without distorting prices
• Decrease population growth long term.