Sample Essay on Causes of Unemployment in Developing Countries

One of the biggest obstacle to development in the world is unemployment. The problem is even bigger in developing countries than in developed countries. Unemployment results when there is a high demand for labor and a low supply of the same. Initially, unemployment was thought to be voluntary, however it was recognized that unemployment in third world countries was due to circumstances beyond the individual’s control. Unemployment can be as a result of seasonal layoffs, racial discrimination, technological changes, and fluctuations in the economy, lack of adequate skills, lack of capital, overpopulation, trading cycle and a poor performance of agricultural sector. In this paper I will analyze the factors causing unemployment in developing countries and recommend remedies for the named factors.


Over the years, the world has experienced rapid population growth and the third world countries are no exception to this development. However, this increase in population is not inversely proportion to the increases of jobs in the job market. As a result, there are more people looking for employment than there are available jobs. Every year, graduates are released to the outside world only to be dismayed by the lack of employment. Those who find it end up taking part time jobs that have no benefits and in the end they lose those jobs. In developing countries, population growth is 3% per annum. Resources in these countries are limited and cannot meet the growing demands by the growing population. Stock of capital in developing countries grows at a very slow rate. Population in these developing nations is growing at a faster rate than the stock of capital. Therefore, the additional population to the labor force cannot be absorbed because instruments of production are not enough. When the population growth rate in a country is more rapid than its capital growth rate, the resulting factor is surplus labor presentingitself inmagnitudes of unemployment both in urban and rural areas.

Population growth in urban areas is another major cause of unemployment in urban areas. Most people move from rural to urban areas in search of blue collar jobs. The urban areas end up being over crowded as a result and the available jobs are limited. Centralization of industries can be blamed for this catastrophe. Most industries are located in cities and thus most people are drawn to them. Natural resources though scarce are left unexploited in the rural areas as everyone moves to the city to secure employment. The rate of rural-urban migration is high than the availability of jobs in urban areas. Those who move to the city end up unemployed some resulting to come while others result to carrying out odd jobs.

Lack of capital

There is a considerable lack of capital in third world countries. For the development of any country, capital is important. Developing countries lack capital required to put up big buildings and factories. There is also no money to expand infrastructure in the already existing factories. The inability to build factories leads to unemployment. Developing countries end up importing the goods they cannot produce in their country. African countries for example do not have many factories so they import their goods from the west and the east. While the demand for goods is met, outsourcing of products leads to unemployment.

While it is possible to turn to self employment, one cannot produce anything without capital. There are tools and resources required to produce goods. For example, a farmer requires farm tools and a farm to invest in agriculture. With the recent development in technology, individuals require more capital to invest in production. Developing countries lack in capital therefore individuals cannot invest in production leaving them unemployed. In absence of capital, a country lack production instruments to create productive employment. In the face of rapid population growth, the problem is tenfold.  Unemployment resulting from lack of capital is referred to chronic or long-term unemployment.

Lack of infrastructure

As mentioned above, lack of capital leads to unemployment in developing countries. Capital refers to machines, buildings equipment, money and buildings. Similar to capital is infrastructure which is deprived or non-existent in developing countries. Developing countries lack roads, highways, power, irrigation facilities, and telecommunication. Inadequate infrastructure hinders generation of economic opportunities thus leading to unemployment.

Neglect of the agricultural sector

Most developing countries are dependent on agriculture as the income generating activity. However, residents of this nations neglect agriculture and prefer to be involved in other economic activities. Neglect of the agricultural sector is a major cause of unemployment in developing nations.Governments of developing nations give little attention to the agricultural sector failing to realize it is important to their development. Developing countries feed most of the developed countries with agricultural supplies. There is a ready market for agricultural produce in the world with the rapid population growth. Investing in agriculture would increase employment. In countries like India, there is poor distribution of land so many agricultural households have no access to land. Rapid population growth continues to reduce land available for agriculture. Agricultural households therefore have no access to land for farming. Many people who were previously employed in agriculture are becoming unemployed or under employed.

Other factors that lead to unemployment in developing countries are the lack of skills, seasonal variations and trade cycle. Most people in developing countries lack access to education. They are therefore not equipped to work in jobs that require special skills. Outsourcing labor is not only expensive but it leads to the unemployment of individuals. Some employment sectors are seasonal. For example, the agricultural sector is at time seasonal and is dependent on climate. During drought seasons, those dependent on agriculture are unemployed. During the recession, unemployment in developing countries increases.


As concerns population growth, developing countries should have an effective check in place. Family planning should be made available to all to reduce population growth. Population growth should be limited to the number of available resources. Governments of developing countries should increase capital formation through the establishment of labor intensive industries.

To prevent rural-urban migration and curb the problem of disguised employment, small scale industries should be introduced in rural areas. Similarly, technical training institutes should be set up to provide training to the public. This will in turn increase skill levels of individuals and prevent outsourcing of employment. Cottage and rural agro industries should be accorded priority to promote rural employment.

The governments of developing countries should increase the rate of investment to encourage developers to create employment. Investment can be encouraged through reduced bank interest rates and introduction of friendly legal policies that favor investment. Most developing countries often turn to external borrowing to create stock capital, however, mobilization of natural resources within these countries can reduce unemployment.