Research Background
According to previous researchers, there are four common factors which affect greatly towards the unemployment rate. Those factors are inflation (INF), GDP growth (GDP), population (POP) and foreign direct investment (FDI). As the unemployment rate of any country does not reflect a healthy sign to the economy, therefore, this study is to figure out determinants majoring on macroeconomic factors that influence the unemployment rate across different countries.
Problem Statement
People in today’s competitive market are actively searching for jobs and are mentally prepared for any kind of jobs provided at any level of wages. These people, if they can’t find a job, the problem of unemployment arises. The large population often contributes towards higher unemployment rates within the country due to the lack of absorption capacity of the country. This issue has become an important subject matter for countries in recent decades. Generally, the government aims at the creation of working opportunities with all the available resources in the industries and regularly pays a lot of attention and concern on this issue as unemployment not only affects socio-economic situations of a country but could also lead to high emigration. If residents are unable to get a job in their home country, they attempt to work overseas if there are opportunities offered to them. Thus, the economic growth of a country would greatly be affected. In long-term, issues such as financial problems, crimination, poverty, inequality, standard of living and mentality may occur (Maqbool, Mahmood, Sattar, & Bhalli, 2013). While some countries have higher unemployment rates, there are countries that are performing very well. Best practices of such countries, if adopted by others, the overall development across the world can be boosted and hence living conditions can be improved.
Significance of Study
Main aim of this research is to explore the relationship of unemployment rate with GDP growth, inflation, population and foreign direct investment (FDI) and to know if the direction of the relationship is the same for all nations. Such significant relationships among variables will help us to better understand the much-dreaded and universal economic phenomena of unemployment. Literature reviews and related journals and articles are searched to understand the accepted view on the problem of unemployment and support our findings for the considered countries.
By analyzing the effects of GDP growth, inflation, population and foreign direct investment (FDI) on unemployment rate on various countries, significant relationships may be proven whether those variables are important and if they provide robust results. Thus, this may benefit future researchers or scholars whenever they would want to further explore the factors which may affect unemployment rate.
It is expected to contribute informative findings to policymakers, researchers or economists on the factors that affect unemployment rate in general. By this, they may get to know the current influencing factors which affect the unemployment rate. This would provide valuable statistics to policymakers about the prospective actions which can be taken according to the nature of the relationship of unemployment with GDP, growth, inflation, population and foreign direct investment (FDI). Similarly, policymakers could adjust macroeconomic strategies based on the significant variables that affect unemployment rates.
Real Unemployment
Real unemployment rates are often a concern over periods for the global economy and improvement is desired. This improvement can be attained by learning about other countries and their policies and practices. In today’s world where rankings and comparisons play an important role in designing the stereotypes and prejudices for different countries and affect a lot of other things, it is important to understand the reasons behind any rank or number. Only then can we get a real picture. Unemployment is one such arena of rankings. Therefore, this study may provide brief ideas to researchers or economists on factors influencing unemployment rates. By this, future researchers may attain variables which affect greatly towards the unemployment rate to predict real unemployment rate.
