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How Unemployment Rate Affects Job Security

written by: Vikas Vij•edited by: Ronda Bowen•updated: 6/29/2011

One of the challenges faced by the modern business organization is to survive in the wake of a slow economy and rising unemployment. A high unemployment rate affects job security, which is a double-edged sword for the organization.

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    Jobless Rate The conditions of an economic slowdown have a direct impact on jobs. The unemployment rate begins to climb, and another more hidden phenomenon that takes place is under-employment. As victims of under-employment, people have to accept smaller jobs compared to their qualifications or experience. A rise in the unemployment rate affects job security adversely across organizations. It becomes a challenge to make employees feel reassured about their job, and there is a general feeling of gloom and insecurity among many employees at different levels within the organization.

     

     

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    Easier and Cheaper Availability of Talent

    A high unemployment rate threatens the job security of employees at any level. The organization is under pressure on one end to cut down costs in a challenging economy, and on the other end there is more accessibility to talented people from outside. Many companies are compelled to hire outside talent at cheaper costs in their battle to survive through the tough times. This leads to insecure job conditions for an employee whose productivity may not be matching to his high costs of employment.

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    Outsourcing of Jobs

    Outsourcing is a global reality that cannot be wished away. Different organizations have different views on outsourcing of jobs, but when it comes to a fight for survival in a challenging economy, the organization will not shy away from exercising job cuts and outsourcing the work to low cost service providers from other countries. Therefore, outsourcing contributes to a higher unemployment rate, which in turn threatens job security within the organization.

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    Adverse Impact on Productivity

    When an employee sees people losing jobs around him, it can create a feeling of insecurity about one’s own job. Particularly, if layoffs happen within one’s own organization, it becomes a challenge to reassure the remaining employees and make them feel secure about their positions. This situation of insecurity has an adverse impact on the overall productivity of the company because the employee is usually unable to work with a single-minded focus, enthusiasm and confidence as before. There is a constant, nagging worry about the stability of the organization due to a slowing economy. No amount of motivational efforts may be sufficient to make the employee completely get rid of the thoughts of gloom and doom.

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    Reverse Impact of Job Security on Unemployment

    Many economists and management experts are of the opinion that a high level of job security also contributes to a rise in unemployment. Employment guarantees, unionization of workers, government interference to protect jobs and highly secure job conditions may lead to inefficiencies in employee performance. This situation ultimately brings down the overall economic productivity and competitiveness of the country, resulting in a higher unemployment rate in the end. This is a controversial issue that has been debated for long among economists and corporate managements around the world.

     

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