How does unemployment influence and affect economic growth?

more money in the pocket of the people, more the economy growth increase

because of the unemployment, the market lost an important proportion of consumers so that most of the consumers bought only what they needs and kept what they want to another days.

Conventionally, most people will define unemployment as lack of jobs for the working population (people able and willing to work) hence ignoring the other factors of production that are also critical to the economy. We think of jobs created in the economy versus the number of able and willing workers to explain levels of unemployment. While human capital is critical, the economy works on a wide spectrum of sectors that each of the other factors of production take precedence depending on its use. For example, land is critical in agriculture than human capital which has been mechanized in that sector. In investments, capital is more critical than land and personnel.

We should also add in the definition of unemployment from simply “lack-of” to “under-utilization” of factors of production.  A medical doctor gainfully employed as a street cleaner or arable land being used as a dumping site does not translate to employment. That is under-utilization of factors of production which should be a critical component in defining unemployment. In most developing countries, scarcity of jobs breeds desperation. It is thus common to have overqualified staff in an organization. Under-employment is critical in addressing the question of economic effects. The training, knowledge, skill, time and other resources in (input) the doctor does not translate to the expected contribution (output) hence a negative effect or in economic terms, diminishing returns.

To then address the question of the effects and influence of unemployment in economic growth, we have to look at all the factors of production, their application, utilization and the levels of utilization and above all, their adequacy in all the sectors of the economy. Taking the earlier example, if a country’s economy is heavily dependent on agriculture, land utilization becomes critical. For another with high dependency on the service industry, people are the drivers. The weights attached to the influence of each factor of production to the overall contribution to growth and effect to the economy will thus vary.

Any factor of production that is not utilized or under-utilized affects the output levels of the production process hence economic growth. If skills or manpower, land or capital are idle, the economy is not gaining from these resources. Effective and efficient employment of all these result in positive growth and vice versa. For efficient economic output, factors of production should be efficient enough to equal or exceed their input levels. Assuming no wastage in the production process and the resultant output and optimum distribution of the same, growth will be realized.

Think about it, all these factors of production also earn when employed. These earnings are saved, spent and/or invested. This increases circulation of money in the economy and demand for goods and services. This is the economic cycle of growth.

 

 

Labor is a main (can be the most important) factor of production, not using this factor leads to a big loss in the output of the economy (production). Also, unemployment means less revenue for people in the country and thereby less active demand. Demand (effective) is very important for the economic cycle. Many researches tried to study the relationship between economic growth and unemployment levels. Studies show that high economic growth rates are associated with low rate of unemployment, especially on the long run (see Okun's Law). To conclude, fixing the effects of productivity - that may be affected by rates of employment- we can say that the relationship between employment and economic growth is evident.

Out put depends on its factors of production. Basic factors of production are Land, Labor, Capital and Management. More of these factors of production will result in higher production. So, keeping other factors of production constant and decreasing the labor utilization will result in lesser output. when output will decline economic growth will decline. Higher the unemployment lower the economic growth and vice versa. 

Unemployment and economic growth are dependent on one another in many ways, and oftentimes unemployment leads to slower economic growth.

Unemployment is countercyclical, meaning that it increases with low economic growth and decreases when the economy begins to grow. An example of this pattern is the global recession that began in 2008 and led to unemployment of more than 200 million individuals, or 7 percent of the worldwide workforce. Many factors influence economic growth but can be divided into two primary groups: the demand side factors and supply side factors. Some factors that can affect economic growth, and therefore employment rates, include incomes and wages, value of exchange rates, asset prices, consumer confidence and interest rates.

Unemployment is a situation where the number of jobs is less than the population available, in some cases the jobs may be available but the labour may not be fit enough to take up such jobs. Economic growth is quantitative increase in the of overall level of goods & services produced in the country. Economic development is both quantitative & qualitative increase in the overall level of goods & services produced in the country. If people are unemployed, they can't earn income, they can't save, they won't have any purchasing power too & they won't invest in ventures (vicious cycle). This cycle will directly negatively affect the goal of Economic growth, and consequently in the long run it will further hinder Economic Development.Thanks for the invitation.

Thanks for the invitation ... I apologize that my area is not economical. But my personal view is that unemployment is a negative factor in economic space. Its effect is to achieve the consumption power of the state and its increase is not considered a good thing but its existence is necessary for the purpose of providing a general human reserve for any building plan in the state institutions.

Frequently unemployment at 5-8% is considered as normal. If reaches 20% and affects especially young people in working age who should earn for their families, it is big problem. In general the greater the use of the workforce, the better for the economy, the more people earn money, the more people spend driving demand and prosperity. There is another issue of structural unemployment that can't be overcome without domestic or foreign investment. Many countries are also faced with a low-income trap: labor costs must be low or unemployment will increase sharply.

A large number of unemployed people is down right nightmare for countries as it affects so many things to even list here. It is considered a big negative indicator about a country's growth and raises their dependence on Government in the forms of Social Care that run into billions of dollars and since the economy is in a slump, countries are forced to borrow from financial giants like the IMF which traps them in a vicious cycle of further borrowing and not being able to clear the previous debt which further slumps the economy which can lead to destabilization of the entire country resulting in much more damages long term.

Economists call unemployment a lagging indicator of the economy.

In addition to many different indicators such as GDP, inflation and interest rates, the unemployment rate of a country is a very common measure for determining the health of an economy. Loss in disposable income becomes a ripple effect, and less money will be spent in the economy, leading to more people losing their jobs and it starts to become a vicious cycle unless it is broken by changes in policy or other factors.

Elevated unemployment imposes significant costs on the individual, the society and the country.

unemployment affects the economic growth with different perspective i.e raises dependency ratio when idle labor aggravates  criminal activities and also it will affect the national income of the country additionally productive level of the country